/raid1/www/Hosts/bankrupt/TCR_Public/210205.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, February 5, 2021, Vol. 25, No. 35
Headlines
1005 LLC: March 17 Plan & Disclosure Hearing Set
5X5 CAPITAL: Seeks to Use Cash Collateral
8723 E. VIA DE COMMERCIO: Seeks to Hire Nino Abate as Legal Counsel
AIRPORT VAN: U.S. Trustee Appoints Creditors' Committee
ALPHA MEDIA: U.S. Trustee Appoints Creditors' Committee
AMERICAN AIRLINES: Exits Distress With Reddit's Help
ANDES INDUSTRIES: Petitioning Creditors Disclose Relationships
ANDES INDUSTRIES: Snell, Hagens 2nd Update on Investors
AUGUSTA INVESTMENTS: Gets Cash Collateral Access Thru March 4
BOY SCOUTS OF AMERICA: Insurers Allege Abuse Claims Fraud
BOY SCOUTS OF AMERICA: Mediation Not Recommended on Appeal
BUILDERS FIRSTSOURCE: Moody's Hikes CFR to Ba2 Amid BMC Merger
BULLET TRANSPORT: U.S. Trustee Unable to Appoint Committee
BY CROWN PARENT: Moody's Completes Review, Retains B2 CFR
CAMBIUM LEARNING: Moody's Completes Review, Retains B3 CFR
CBL & ASSOCIATES: Says It Didn't Default on $1.1B Wells Fargo Loan
CD 2005-CD1: Moody's Lowers Rating on Class G Certs to 'Ca(sf)'
CENTURIA FOODS: Seeks to Hire Larson & Zirzow as Legal Counsel
CENTURY 21: Seeks to Hire Berdon LLP as Tax Consultant
CGE REAL ESTATE: McKnight Violated Stay Order, Court Says
CHESAPEAKE ENERGY: Plans Cut Staff by 15% Prior to Bankruptcy Exit
CHRISTOPHER & BANKS: McCarter, Russell Represent Utility Companies
CINEMEX USA: Lakeside's Bid to Compel Compliance Party Granted
CLEAR CHANNEL: Moody's Rates Proposed $1BB Unsecured Note Caa2
CLEVELAND-CLIFF INC: Fitch Upgrades Senior Unsecured Notes to 'B'
COMMUNITY HEALTH: Releases Early Tender Offer Results
CRACKED EGG: Ordered to Follow Face Covering Ruling or Close
CRED INC: Court Denies Motion to Dismiss Subsidiary's Case
CROWDSTRIKE HOLDINGS: Moody's Completes Review, Retains Ba2 Rating
DAVID CORN: Bud Palmer to Auction Merchandise on Feb. 17
DENTALCORP HEALTH: Moody's Affirms B3 CFR, Outlook Negative
DIVERSIFIED HEALTHCARE: Moody's Cuts CFR to Ba3, Outlook Negative
E.B.J.T. ENTERPRISE: Seeks to Hire Abbasi Law as Counsel
EASTERDAY RANCHES: Court Lets Tyson Fresh Feed 54,000 Cows
EVERGLADES ADVENTURE: Seeks to Hire Dal Lago Law as Legal Counsel
FENDER MUSICAL: Moody's Completes Review, Retains B1 Rating
FERRELLGAS PARTNERS: Appointment of Equity Committee Sought
FETCH ACQUISITION: Moody's Completes Review, Retains B3 CFR
FLEXERA SOFTWARE: Moody's Completes Review, Retains B2 CFR
FORESTAR GROUP: Moody's Hikes CFR to B1 on Continued Improvement
FRONTERA HOLDINGS: Case Summary & 30 Largest Unsecured Creditors
FRONTERA HOLDINGS: Enters Chapter 11 With Deal to Cut Debt by $800M
FXI HOLDINGS: Moody's Completes Review, Retains B3 CFR
GAINWELL ACQUISITION: Fitch Assigns First-Time 'B' LongTerm IDR
GARRETT MOTION: Hires Perella Weinberg as Investment Banker
GATEWAY FOUR: Case Trustee Seeks to Use Cash Collateral
GENERATION ZERO: Cases Dismissed as Bad Faith Filing
GENESIS VASCULAR: U.S. Trustee Unable to Appoint Committee
GENEVER HOLDINGS: Hires Goldberg Weprin as Bankruptcy Counsel
GI DYNAMICS: Extends Stock Offering Final Closing Date to Feb. 24
GIRARDI & KEESE: Trustee Hands Off SoCalGas Case to Frantz Firm
GIRARDI & KEESE: Trustee Objects to Guardian Ad Litem Appointment
GLOBAL EAGLE: Further Fine-Tunes Plan Documents
GLOBAL PACIFIC: Case Summary & 5 Unsecured Creditors
GORDON BROTHERS: Affiliate Wins Cash Collateral Access Thru Feb 28
GREAT WESTERN: Fitch Puts 'C' IDR on Watch Positive
GROW CAPITAL: Reports $1-Mil. Net Loss for Quarter Ended Sept. 30
GULFPORT ENERGY: Litigation Claimants Oppose Plan Releases
GULFPORT ENERGY: Rover Pipeline Says Disclosures Deficient
INNOVATIVE DESIGNS: Delays Filing of Fiscal 2020 Annual Report
JADEX INC: Moody's Rates New $450MM First Lien Loan 'B2'
KNOTEL INC: Chairman & Co-Founder Steps Down Days After Bankruptcy
L'OCCITANE INC: Feb. 5 Deadline Set for Panel Questionnaires
LEON USA: 4 Restaurants File for Chapter 7 Bankruptcy
LEVI STRAUSS: Fitch Gives BB Rating on $500MM Unsec. Notes Due 2031
LOGMEIN INC: Moody's Affirms B2 CFR & Cuts First Lien Loans to B2
LSF9 ATLANTIS: Fitch Assigns First-Time 'B' LT IDR, Outlook Stable
LSF9 ATLANTIS: Moody's Affirms B2 CFR & Rates New Secured Notes B2
M TRAN CONSTRUCTION: Unsecured Creditors to Recover 5% in 41 Months
MA REAL ESTATE: Seeks to Use Wildfire Credit Union Cash Collateral
MAINEGENERAL HEALTH: Fitch Withdraws 'BB' Ratings
MALLINCKRODT PLC: Bid to Reconsider Preliminary Injunction Denied
MALLINCKRODT PLC: Hires William Blair as Investment Banker
MEDIAOCEAN LLC: Moody's Completes Review, Retains B2 CFR
METRO PUERTO RICO: Court Grants 60-Day Plan Filing Extension
NATIONAL RIFLE ASSOCIATION: Lets Critics Peer to Inner Workings
NAVIENT CORP: Fitch Assigns BB- Rating on USD500MM Unsec. Notes
NEET DREAMS: U.S. Trustee Unable to Appoint Committee
NEIMAN MARCUS: Marble Ridge Founder Pleads Guilty to Fraud
NEWELL MOWING: Gets Cash Collateral Access Thru Feb. 17
NEWELL MOWING: Seeks to Hire SL Biggs as Accountant
NORBORD INC: West Fraser Deal No Impact on Moody's Ba1 Rating
OCEAN POWER: Acquires Offshore Energy Engineering Firm 3Dent
ONE AVIATION: Mediation Not Recommended for Appealed Issues
PARSLEY ENERGY: Moody's Confirms Ba2 CFR Amid Pioneer Transaction
PEAK SERVICES: Gets Cash Collateral Access Thru March 31
PEARL CITY, MS: Moody's Affirms Ba2 Rating on GO Bonds
PLANVIEW PARENT: Moody's Completes Review, Retains B3 CFR
POINT LOOKOUT: Seeks to Hire Joann M. Wood as Special Counsel
PRFESSIONAL INVESTORS 43: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 38: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 39: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 42: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 44: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 45: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 47: Involuntary Chapter 11 Case Summary
PROFESSIONAL INVESTORS 48: Involuntary Chapter 11 Case Summary
PROJECT ALPHA: Moody's Completes Review, Retains B3 Rating
RENOVATE AMERICA: Committee Hires Troutman Pepper as Counsel
ROMANS HOUSE: Seeks to Hire Levene Neale as Co‐Bankruptcy Counsel
SABLE PERMIAN: Amends Plan to Add Details on Liquidating Trust
SEADRILL LTD: 9 of 12 Creditor Groups Extend Forbearance to Feb. 15
SERTA SIMMONS: Moody's Completes Review, Retains Caa3 CFR
SHARPE CONTRACTORS: Gets Cash Collateral Access on Final Basis
SILGAN HOLDINGS: Fitch Assigns First-Time 'BB+' LongTerm IDR
SILVERLINER LLC: Gets Cash Collateral Access Thru Feb. 28
SITO MOBILE: Genova Burns Approved as New Counsel
SOUTHWESTERN ENERGY: Fitch Affirms 'BB' LT IDR, Outlook Stable
SPANISH HEIGHTS: Case Summary & 3 Unsecured Creditors
SPHERATURE INVESTMENTS: Two Creditors Out as Committee Members
SPI ENERGY: Issues $4.21M 10% Convertible Promissory Note
STEINWAY MUSICAL: Moody's Completes Review, Retains B2 Rating
STREBOR SPECIALTIES: March 9 Plan Confirmation Hearing Set
SUMMIT HOTELS: Case Summary & 20 Largest Unsecured Creditors
TALK VENTURE: Wells Fargo Says Amended Plan Unconfirmable
TGP HOLDINGS III: Moody's Completes Review, Retains B3 CFR
TIBCO SOFTWARE: Moody's Completes Review, Retains B3 CFR
TM HEALTHCARE: Committee Taps Berkowitz as Financial Advisor
TURNING POINT: Moody's Rates New $250MM Secured Notes 'Ba3'
UNIVAR SOLUTIONS: Fitch Upgrades LT IDR to 'BB+', Outlook Stable
UNIVERSITY DEVELOPMENTS: March 12 Foreclosure Sale Set
VERSCEND INTERMEDIATE: Fitch Assigns First-Time 'B' LT IDR
WARDMAN HOTEL: Chapter 11 Case Belongs in Delaware, Says Owner
WATERSHED HOLDINGS: Case Summary & 20 Largest Unsecured Creditors
WEINSTEIN CO: 3 Actresses to Appeal $17-Mil. Plan Approval
WELD NORTH: Moody's Completes Review, Retains B2 CFR
XPERI HOLDING: Moody's Completes Review, Retains Ba3 CFR
YC ATLANTA HOTEL: Case Summary & 20 Largest Unsecured Creditors
YELLOWSTONE TRANSPORTATION: Case Summary & 17 Unsecured Creditors
[^] BOOK REVIEW: Hospitals, Health and People
*********
1005 LLC: March 17 Plan & Disclosure Hearing Set
------------------------------------------------
Debtor 1005, LLC, filed with the U.S. Bankruptcy Court for the
Western District of Oklahoma a motion for entry of an order
approving the Disclosure Statement. On Jan. 26, 2021, Judge Janice
D. Loyd provisionally approved the Disclosure Statement and ordered
that:
* The Debtor and others may solicit acceptances of the Plan
based upon the Disclosure Statement.
* March 5, 2021, at 5:00 p.m. is the voting deadline.
* March 5, 2021, is fixed as the last day to file objections
to approval of the Disclosure Statement or confirmation of the
Plan.
* March 12, 2021, is the deadline for filing a confirmation
brief, a balloting report, and responses to objections.
* March 17, 2021, at 9:30 a.m. is the Combined Hearing on
approval of Disclosure Statement and Confirmation of the Plan.
A full-text copy of the order dated Jan. 26, 2021, is available at
https://bit.ly/3czVjda from PacerMonitor.com at no charge.
Attorney for the Debtor:
HALL, ESTILL HARDWICK, GABLE, GOLDEN & NELSON, P.C.
Larry G. Ball
100 North Broadway, Suite 2900
Oklahoma City, OK 73102-8865
Telephone: (405) 553-2828
Facsimile: (405) 553-2855
E-mail: lball@hallestill.com
About 1005, LLC
1005, LLC, an Oklahoma limited liability company, owns and operates
a commercial office building in Moore, Oklahoma. It has been in
this business since June 2015. The principal and sole owner of the
company is Amir Farzaneh.
1005, LLC, filed a Chapter 11 petition (Bankr. W.D. Okla. Case No.
20-12631) on Aug. 7, 2020. In the petition signed by Amir M.
Farzaneh, owner and manager, the Debtor was estimated to have $1
million to $10 million in both assets and liabilities. Hall Estill
Hardwick Gable Golden & Nelson, P.C., serves as bankruptcy counsel
to the Debtor.
5X5 CAPITAL: Seeks to Use Cash Collateral
-----------------------------------------
5X5 Capital LLC asks the U.S. Bankruptcy Court for the District of
Colorado for authority to use cash collateral in accordance with a
budget, to operate its pizzeria business and keep its 17 employees
on the job.
The Debtor says its business depends upon uninterrupted access to
funds that were held in its accounts necessary to operate, meet
payroll, and fund its other operating expenses necessary to
maintaining its ordinary course of business. The Debtor adds it
will use cash collateral to generate new business during the
bankruptcy case.
An online public records search with the Colorado Secretary of
State shows three UCC Financing Statements (i.e. UCC-1s) filed,
each claiming a blanket security interest in 5X5 Capital's assets:
(a) CHTD Company filed a UCC Financing Statement on February
6, 2019, at master ID: 201920210229 and with a validation number
of: 20192010029.
(b) Axos Bank filed a UCC Financing Statement on July 30,
2019, at master ID: 20192067694 and with a validation number of:
20192067694.
(c) Corporation Service Company filed a UCC Financing
Statement on May 14, 2019, at
master ID: 20192041446 and with a validation number of:
20192041446.
(d) Corporation Service Company filed an additional UCC
Financing Statement on November 18, 2019, at master ID: 20192106136
and with a validation number of: 20192106136.
All four of the UCC Financing Statements appear to perfect a valid
lien and claim a blanket security interest in all of 5X5 Capital's
assets including among other things, its cash, bank accounts,
equipment, general intangibles, etc.
As adequate protection, to the extent any of the creditors are
properly perfected secured creditors, they are entitled, pursuant
to Bankruptcy Code sections 361, 363(c)(2) and 363(e), to adequate
protection of their interests in the pre-petition collateral in an
amount equal to the aggregate post-petition diminution in value of
the pre-petition collateral, including without limitation, any such
diminution resulting from the sale, lease or use by the Debtor(or
other decline in value) of the pre-petition collateral and the
imposition of the automatic stay pursuant to Bankruptcy Code
section 362.
As further adequate protection, the Debtor proposes to grant the
Secured Lenders these claims, liens, rights and benefits:
a. Section 507(b) Claim. The Adequate Protection Obligations
due to the Secured Lenders will constitute a super priority claim
against the Debtors as provided in Bankruptcy Code section 507(b),
with priority in payment over any and all unsecured claims and
administrative expense claims against the Debtor.
b. Replacement Lien. To the extent that any of the Secured
Lenders have a properly perfected pre-petition lien on the cash
collateral, the Debtor consents to a replacement lien on all
post-petition cash collateral in order for the Debtor to continue
to operate to the extent that there is a decrease in value of any
Secured Lender’s interest in the cash collateral in the same
extent and priority that existed on the Petition Date.
c. Carve Out. Subject to Court approval, certain expenditures
will be allowed to be paid from cash collateral.
The Debtor's use of cash collateral will terminate on the earlier
of: the Debtors' failure to make any of the Adequate Protection
Obligations or otherwise cure such payments after seven days'
written notice; the Court's appointment of a chapter 11 trustee or
examiner; conversion of the chapter 11 case to a chapter 7 case;
the Debtor's failure to comply with the requirements set forth in
the Order approving the Motion; a material adverse change in the
Debtor's financial condition or business operations; or
confirmation of a Chapter 11 Plan of Reorganization.
5x5 Capital sought Chapter 11 protection in January after its
landlord, The Shops at Highland Walk, commenced an eviction action.
Shea Properties, which manages the property, is seeking payment of
$64,575 in rent and other charges. Counsel to the Debtor's owners,
Brent and Kristen Barnett, attempted to negotiate a settlement with
the landlord's attorney but all offers were rejected, with little
to no counter offers. Shea previously advised the Barnetts in
November 2020 it would be marketing the space to find a different
tenant.
The Barnett have applied for a PPP loan on the hope that they will
receive enough funds to be able to pay off the amount owed to the
landlord. It is unknown if/when they will receive these funds
Trial in the eviction case was set for January 28, 2021, but was
stayed due to the Chapter 11 bankruptcy filing.
A copy of the Debtor's motion is available at
https://bit.ly/3asFGSe from PacerMonitor.com.
About 5X5 Capital LLC
5X5 Capital LLC owns and operates a franchise of Garlic Jim's
Famous Gourmet Pizza located at 3982 Red Cedar Dr, Highlands Ranch,
CO 80126. 5X5 Capital sought protection under Subchapter V of
Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Colo. Case No.
21-10405) on January 27, 2021. In the petition signed by Brent and
Kristen Barnett, joint and equal co-owners, the Debtor disclosed
between $100,001 to $500,000 in both assets and liabilities.
The Debtor is represented by:
David M. Serafin, Esq.
Law Office of David M. Serafin
501 S. Cherry St., Ste. 1100
Denver, CO 80246
Tel: (303) 862-9124
E-mail: david@davidserafinlaw.com
8723 E. VIA DE COMMERCIO: Seeks to Hire Nino Abate as Legal Counsel
-------------------------------------------------------------------
8723 E. Via De Commercio, LLC, seeks approval from the U.S.
Bankruptcy Court for the District of Arizona to hire The Law Office
of Nino Abate, PLC, as its counsel.
The firm's services include:
a. providing legal advice with respect to the bankruptcy;
b. representing in any necessary negotiations involving
secured and unsecured creditors;
c. representing at hearings set by the Court in these
proceedings;
d. preparing necessary applications, motions, answers, orders,
reports, or other legal papers necessary to assist
Debtor-in-Possession in these proceedings.
The firm will be paid at these rates:
Nino Abate, Attorney $295 an hour
Paralegal $125 per hour
The firm represents no interest adverse to Debtor-in-Possession or
the estate, as disclosed in the court filing.
The firm can be reached through:
Nino Abate, Esq.
The Law Office of Nino Abate, PLC
6900 E. Camelback Rd., Ste. 604
Scottsdale, AZ 85251
Tel/Fax: (480) 314-3304
About 8723 E. Via De Commercio
8723 E. Via De Commercio, LLC, sought protection for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Ariz. Case No.
20-13410) on Dec. 17, 2020, disclosing under $1 million in both
assets and liabilities. Nino Abate, Esq. at The Law Office of Nino
Abate, PLC, serves as the Debtor's counsel.
AIRPORT VAN: U.S. Trustee Appoints Creditors' Committee
-------------------------------------------------------
The U.S. Trustee for Region 16 on Feb. 3 appointed an official
committee to represent unsecured creditors in the Chapter 11 cases
of Airport Van Rental Inc. and its affiliates.
The committee members are:
(1) Susan Gardner
c/o The Pep Boys-Manny, Moe & Jack
3111 W. Allegheny Ave.
Philadelphia, PA 19132
Phone: (303) 946-8779
E-mail: susan_gardner@pepboys.com
Represented by:
Jeremy A. Campana, Esq.
Thompson Hine, LLP
127 Public Sq., Suite 3900
Cleveland, OH 44114
Phone: (216) 566-5936
E-mail: Jeremy.campana@thompsonhine.com
(2) Andre du Toit
c/o Tri Global, Inc.
106 Golden Street
Stanley, NC 28164
Phone: (980) 721-3995
E-mail: accounting@triglobal.com
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About Airport Van Rental
Airport Van Rental -- https://www.airportvanrental.com -- is a van
rental company offering short and long-term rentals for road trips,
weekend journeys, moving, and any other group outings.
Airport Van Rental and its affiliates filed their voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
C.D. Calif. Lead Case No. 20-20876) on Dec. 11, 2020. Yazdan
Irani, president and chief executive officer, signed the petitions.
At the time of the filing, Airport Van Rental disclosed assets of
between $10 million and $50 million and liabilities of the same
range.
The Debtors tapped Danning, Gill, Israel & Krasnoff, LLP as their
bankruptcy counsel, CSA Partners LLC as financial consultant, and
Joel Glaser, APC as litigation counsel. Kevin S. Tierney is the
Debtors' chief reorganization officer.
ALPHA MEDIA: U.S. Trustee Appoints Creditors' Committee
-------------------------------------------------------
John Fitzgerald, III, Acting U.S. Trustee for Region 4, on Feb. 4
appointed an official committee to represent unsecured creditors in
the Chapter 11 cases of Alpha Media Holdings LLC and its
affiliates.
The committee members are:
(1) Crown Castle Towers 05 LLC
2000 Corporate Drive
Canonsburg, PA 15317
(2) SBA Towers LLC
8051 Congress Avenue
Boca Raton, FL 33487-1307
(3) SoundExchange, Inc.
733 10th Street, NW, 10th Floor
Washington, DC 20001
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About Alpha Media Holdings
Alpha Media is a privately-held radio broadcast and multimedia
company. Formed in 2009 by a veteran radio executive, Alpha Media
grew through acquisitions and now owns or operates more than 200
radio stations that provide local news, sports, music, and
entertainment to a weekly audience of more than 11 million
listeners in 44 communities across the United States. In addition
to its radio stations, Alpha Media provides digital content through
more than 200 websites and countless mobile applications and
digital streaming services.
Alpha Media and its affiliates sought Chapter 11 protection (Bankr.
E.D. Va. Lead Case No. 21-30209) on Jan. 25, 2021. John Grossi,
chief financial officer, signed the petitions. At the time of the
filing, Alpha Media disclosed estimated assets of $10 million to
$50 million and estimated liabilities of $50 million to $100
million.
Judge Kevin R. Huennekens oversees the cases.
The Debtors tapped Sheppard, Mullin, Richter & Hampton LLP as legal
counsel; Kutak Rock LLP as local counsel; Moelis & Company as
financial advisor; and Ernst & Young LLP as restructuring advisor.
Stretto is the claims and noticing agent.
AMERICAN AIRLINES: Exits Distress With Reddit's Help
----------------------------------------------------
Katherine Doherty and Kiel Porter of Bloomberg News report that
after nearly a year of turmoil, some of American Airlines Group's
riskiest bonds are flying out of distress.
The move marks a significant comeback for the company, whose debt
traded for as little as 31.5 cents on the dollar last May.
American's 3.75% notes due 2025 rallied to 78.125 cents on the
dollar Tuesday, February 2, 2021, their highest price since March.
Their spread over comparable Treasuries sits just over the
traditional 1,000 basis point definition of distress.
Meanwhile, many of American Airlines' other borrowings now trade in
the 90s or higher. American was among the largest U.S. distressed
issuers earlier in January 2021.
About American Airlines
American Airlines Group Incorporated is an American publicly traded
airline holding company headquartered in Fort Worth, Texas. It was
formed on December 9, 2013, in the merger of AMR Corporation, the
parent company of American Airlines, and US Airways Group, the
parent company of US Airways.
Before the Coronavirus pandemic, American Airlines offered
customers 6,800 daily flights to more than 365 destinations in 61
countries from its hubs in Charlotte, Chicago, Dallas-Fort Worth,
Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington,
D.C. As of Dec. 31, 2018, the company operated a mainline fleet of
956 aircraft.
The airline industry has been severely affected by the economic
shutdowns and travel restrictions brought by the Coronavirus
pandemic.
ANDES INDUSTRIES: Petitioning Creditors Disclose Relationships
--------------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure
and the Court's Order on the record at the Jan. 19, 2020
hearing, EZconn Corporation, eGTran Corporation, Cheng-Sun Lan,
Devon Investment, Inc., and Crestwood Capital Corporation
(Collectively, the "Petitioning Creditors") supplement their
verified statement filed on Nov. 17, 2020, to reflect the
relationships between the Petitioning Creditors, Polar Star
Management, Ltd., and Chi-Jen (Dennis) Lan in the chapter 11
cases of Andes Industries, Inc. and PCT International, Inc.
The Petitioning Creditors consist of multiple creditors with common
interests, namely, EZconn, eGTran, Devon, Crestwood, and Mr.
Cheng-Sun Lan.
As of Feb. 2, 2021, each of the Petitioning Creditors and their
disclosable economic interests and their relationships are:
EZconn Corporation
No. 12, Lane 12, Lite Road
Beitou District, Taiwan 112
* Nature of Claim: Judgements
* Amount of Claim Interest: $451,522.79 (Andes)
$8,384,561.49 (PCT)
* On or about September 30, 2006, EZConn was acquired by CabTel
Corporation, a subsidiary of eGTran.
* In late 2012, eGTran spun off to its shareholders 80% of the
EZconn common shares held by CabTel.
* As of January 22, 2021, CabTel owned 9.08% of the common shares
of EZconn.
* As of January 22, 2021, eGTran owned 6.48% of EZconn's common
stock.
* Mr. Lan, with his wife, holds less than 2% of EZconn's common
shares.
* As of January 21, 2021, Mr. Dennis Lan owned 1.41% of the common
shares of EZconn.
Crestwood Capital Corporation
c/o Ronald W. Hofer
1428 Harvest Crossing Dr.
McLean, Virginia 22101
* Nature of Claim: Judgement
* Amount of Claim Interest: $5,279,263.64 (Andes)
* Mr. Cheng-Sun Lan holds a 100% equity interest in Crestwood.
* Crestwood is managed by its sole director, Javert, LLC, whose
manager is Ronald Hofer.
Devon Investments, Inc.
c/o Ronald W. Hofer
1428 Harvest Crossing Dr.
McLean, Virginia 22101
* Nature of Claim: Judgement
* Amount of Claim Interest: $8,195,402.00 (Andes)
* Mr. Chi-Jen (Dennis) Lan holds a 100% equity interest in Devon.
* Devon is managed by its sole director, Javert, LLC, whose
manager is Ronald Hofer.
eGTran Corporation
c/o Michael Kroon, Esq.
P.O. Box 71
Road Town, Tortola BVI VG1110
* Nature of Claim: Judgement
* Amount of Claim Interest: $122,995.57 (PCT & Andes)
* On or about September 30, 2006, a subsidiary of eGTran, CabTel
Corporation acquired EZConn.
* Mr. Cheng-Sun Lan owns 1.3% of eGTran's common shares.
* Mr. Dennis Lan owns 0.05% of eGTran's common shares
Cheng-Sun Lan
c/o Alex C.Y. Chen 9F-5
No. 26, Sec. 2 Minquan E. Rd.
Zhongshan Dist.
Taipei, Taiwan
* Nature of Claim: Judgement
* Amount of Claim Interest: $54,815.10 (PCT & Andes)
* Mr. Lan served as the Chairman of the Board of Directors of
eGTran from October 2006 to early March 2007.
* Mr. Lan served on eGTran's Board of Directors from March 2007 to
present.
* Mr. Lan owns 1.3% of eGTran's common shares.
* Mr. Lan served as the Chairman of the Board of Directors of
EZconn from October 2006 to April 2007
* Mr. Lan served on Board of Directors of EZconn from March 2007
to December 2012.
* Mr. Lan, with his wife, holds less than 2% of EZconn's common
shares.
* Mr. Lan holds a 100% equity interest in Crestwood.
* Mr. Lan holds a 30% minority beneficiary interest in stock of
Andes that is held by Polar Star Management, Ltd.
* Mr. Chi-Jen (Dennis) Lan is Mr. Cheng-Sun Lan's son.
Kun-Te Yang does not hold his 21.33%2 interest in Andes for the
benefit of Mr. Lan, eGTran, EZconn, Devon, or Crestwood.
Counsel for Creditors EZconn Corporation, eGTran Corporation,
Cheng-Sun Lan, Devon Investment, Inc., and Crestwood Capital
Corporation can be reached at:
SNELL & WILMER L.L.P.
Christopher H. Bayley, Esq.
Benjamin W. Reeves, Esq.
Molly J. Kjartanson, Esq.
One Arizona Center
400 E. Van Buren, Suite 1900
Phoenix, AZ 85004-2202
Telephone: 602.382.6000
Email: cbayley@swlaw.com
breeves@swlaw.com
mkjartanson@swlaw.com
- and -
HAGENS BERMAN SOBOL SHAPIRO LLP
Greer N. Shaw, Esq.
301 N. Lake Ave., Suite 920
Pasadena, CA 91101
Telephone: 213-330-7145
Email: greers@hbsslaw.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/2Mot1I5 and https://bit.ly/39M7Okf
About Andes Industries
Creditors EZconn Corporation, Crestwood Capital Corporation, and
Devon Investment Inc. filed involuntary bankruptcy petitions
against Andes Industries, Inc., and PCT International, Inc. under
Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court for
the District of Arizona. On Dec. 4, 2019, the Chapter 7 cases were
converted to cases under Chapter 11 (Bankr. D. Ariz. Lead Case No.
19-14585). Judge Paul Sala oversees the cases.
The Debtors tapped Sacks Tierney P.A. as legal counsel, Beus
Gilbert McGroder PLLC as special counsel, and Keegan Linscott &
Associates, PC as financial consultant.
The Office of the U.S. Trustee appointed a committee of unsecured
creditors on Jan. 29, 2020. The committee is represented by Allen
Barnes & Jones, PLC.
The Debtors filed their joint Chapter 11 plan and disclosure
statement on June 8, 2020.
ANDES INDUSTRIES: Snell, Hagens 2nd Update on Investors
-------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure,
the law firms of Snell & Wilmer L.L.P. and Hagens Berman Sobol
Shapiro LLP submitted a second supplemental verified statement to
disclose an updated list of investors that they are representing in
the Chapter 11 cases of Andes Industries, Inc. and PCT
International, Inc.
From March 2015 until about Dec. 18, 2015, Snell represented
Crestwood and Devon. Mr. Shaw was a partner at Snell until about
Dec. 18, 2015. In or about January 2016, Mr. Shaw joined HBSS as
Of Counsel.
From June 2015 through Dec. 18, 2015, Snell represented EZconn.
In January 2016, HBSS was retained to represent EZconn Corporation,
eGTran Corporation, Cheng-Sun Lan, Crestwood Capital Corporation,
and Devon Investments, Inc.
Additionally, in January 2016, HBSS was retained to represent Polar
Star Management Ltd. as a defendant in Andes Industries, Inc. et
al. v. Lan et al., CV-15-02549-NVW in the United States District
Court for the District of Arizona. That representation terminated
in or about December 2017.
In October 2016, HBSS was retained to represent Chi-Jen Lan as a
defendant in Andes Industries, Inc. et al. v. Lan et al.,
CV-15-02549- NVW and with respect to claims and discovery efforts
that might be pursued against him in Devon Investment Inc. v. Andes
Industries, Inc., CV-15-00604-NVW. That representation terminated
in or about October 2017.
In or about November 2019, Snell was retained to represent the
Petitioning Creditors in connection with the above-captioned
chapter 11 cases.
On or about September 22, 2020, the Firms were retained to
represent Polar Star and Dennis Lan in the Chapter 11 Cases for the
purpose of objecting to Debtors' Amended Joint Plan of
Reorganization Dated August 10, 2020.
Snell only represents the Petitioning Creditors and the Interest
Holders in these Chapter 11 Cases.
The Petitioning Creditors and the Interest Holders are the only
HBSS clients who are creditors, equity holders, or other parties in
interest in the Chapter 11 Cases.
HBSS represented Kun-Te Yang, a minority shareholder of Andes, from
October 2016 until approximately October 2017 as a defendant in
Andes Industries, Inc. et al. v. Lan et al., CV-15-02549-NVW and
also with respect to claims and discovery efforts that might be
pursued against him in Preston Collection Inc. v. Steven Youtsey,
Case No. CV-15-00607-NVW. That representation terminated in or
about October 2017.
HBSS represented Preston Collection, Inc., an entity solely owned
by Yang, from January 2016 until approximately October 2020 in
connection with Preston Collection Inc. v. Steven Youtsey, Case No.
15-cv-00607-NVW. That representation terminated in or about October
2020.
HBSS does not represent Yang or Preston Collection.
In January 2016, HBSS was retained by Javert LLC, the sole director
of each Devon, Crestwood, and Preston, for the purpose of
litigations in the United States District Court for the District of
Arizona styled as Crestwood Capital Corporation v. Andes
Industries, Inc., Case No. 15-cv-00600-NVW, Devon Investment Inc.
v. Andes Industries, Inc., Case No. 15-cv-00604-NVW (D. Ariz.), and
Preston Collection Inc. v. Steven Youtsey, Case No.
15-cv-00607-NVW. Javert LLC was never a party to any of these
District Court litigations, never owned any claims or judgments
against Andes, PCT International, Inc., or Mr. Youtsey, and is not
a claimant in the Chapter 11 Cases. Javert LLC does not and has not
held any equity in Andes or PCT. HBSS does not represent Javert LLC
in these Chapter 11 Cases as a creditor, party-in-interest, or
equity holder.
As stated above, Mr. Shaw was a partner at Snell until about Dec.
18, 2015. As such, from November 2014 through December 18, 2015,
Snell represented Javert LLC.
Additionally, Snell represented Preston Collection, Inc. from March
23, 2015 until Dec. 18, 2015.
As of Feb. 2, 2021, each of the Petitioning Creditors' and
Interest Holders' and their disclosable economic interests are:
EZconn Corporation
No. 12, Lane 12, Lite Road
Beitou District, Taiwan 112
* Nature of Claim: Judgements
* Amount of Claim Interest: $451,522.79 (Andes)
$8,384,561.49 (PCT)
Crestwood Capital Corporation
c/o Ronald W. Hofer
1428 Harvest Crossing Dr.
McLean, Virginia 22101
* Nature of Claim: Judgement
* Amount of Claim Interest: $5,279,263.64 (Andes)
Devon Investments, Inc.
c/o Ronald W. Hofer
1428 Harvest Crossing Dr.
McLean, Virginia 22101
* Nature of Claim: Judgement
* Amount of Claim Interest: $8,195,402.00 (Andes)
eGTran Corporation
c/o Michael Kroon, Esq.
P.O. Box 71
Road Town, Tortola
BVI VG1110
* Nature of Claim: Judgement
* Amount of Claim Interest: $122,995.57 (PCT & Andes)
Cheng-Sun Lan
c/o Alex C.Y. Chen
9F-5, No. 26, Sec. 2
Minquan E. Rd.
Zhongshan Dist.
Taipei, Taiwan
* Nature of Claim: Judgement
* Amount of Claim Interest: $54,815.10 (PCT & Andes)
Polar Star Management Ltd.
c/o Portcullis (BVI) Ltd of Portcullis Chambers
4th Floor Ellen Skelton Building
3076 Sir Francis Drake Highway
Road Town, Tortola
British Virgin Islands
VG1110
* Nature of Claim: Equity Holder of Andes Industries, Inc.
* Amount of Claim Interest: 5.39% (Andes)
Chi-Jen (Dennis) Lan
c/o Alex C.Y. Chen
9F-5, No. 26, Sec. 2
Minquan E. Rd. Zhongshan Dist.
Taipei, Taiwan
* Nature of Claim: Equity Holder of Andes Industries, Inc.
* Amount of Claim Interest: 8.61% (Andes)
Counsel for Creditors EZconn Corporation, eGTran Corporation,
Cheng-Sun Lan, Devon Investment, Inc., and Crestwood Capital
Corporation, Polar Star Management Ltd. and Chi-Jen Lan can be
reached at:
SNELL & WILMER L.L.P.
Christopher H. Bayley, Esq.
Benjamin W. Reeves, Esq.
Molly J. Kjartanson, Esq.
One Arizona Center
400 E. Van Buren, Suite 1900
Phoenix, AZ 85004-2202
Telephone: 602.382.6000
E-Mail: cbayley@swlaw.com
breeves@swlaw.com
mkjartanson@swlaw.com
- and -
HAGENS BERMAN SOBOL SHAPIRO LLP
Greer N. Shaw, Esq.
301 N. Lake Ave., Suite 920
Pasadena, CA 91101
Telephone: 213-330-7145
Email: greers@hbsslaw.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/36FaVbG and https://bit.ly/3oNKQ0j
About Andes Industries
Creditors EZconn Corporation, Crestwood Capital Corporation, and
Devon Investment Inc. filed involuntary bankruptcy petitions
against Andes Industries, Inc. and PCT International, Inc. under
Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court for
the District of Arizona. On Dec. 4, 2019, the Chapter 7 cases were
converted to cases under Chapter 11 (Bankr. D. Ariz. Lead Case No.
19-14585). Judge Paul Sala oversees the cases.
The Debtors tapped Sacks Tierney P.A. as legal counsel, Beus
Gilbert McGroder PLLC as special counsel, and Keegan Linscott &
Associates, PC as financial consultant.
The Office of the U.S. Trustee appointed a committee of unsecured
creditors on Jan. 29, 2020. The committee is represented by Allen
Barnes & Jones, PLC.
The Debtors filed their joint Chapter 11 plan and disclosure
statement on June 8, 2020.
AUGUSTA INVESTMENTS: Gets Cash Collateral Access Thru March 4
-------------------------------------------------------------
The U.S. Bankruptcy Court for the Middle District of Florida,
Orlando Division, has authorized Augusta Investments Corporation to
use cash collateral on an interim basis through March 4, 2021.
The Debtor is permitted to use cash collateral to pay: (a) amounts
expressly authorized by the Court; (b) the current and necessary
itemized expenses set forth in the budget, plus an amount not to
exceed 10% for each line item; and (c) additional amounts as may be
expressly approved in writing by MTM Bros, LLC, as secured
creditor.
Each Secured Creditor with a security interest in cash collateral
will have a perfected post-petition lien against cash collateral to
the same extent and with the same validity and priority as the
prepetition lien, without the need to file or execute any document
as may otherwise be required under applicable non-bankruptcy law.
The Debtor is also directed to maintain insurance coverage for its
property in accordance with the obligations under the loan and
security documents with the Secured Creditor.
A further hearing on the Motion is scheduled for March 4 at 11
a.m.
A copy of the Order and the Debtor's budget is available for free
at https://bit.ly/3j9tee6 from PacerMonitor.com.
About Augusta Investments
Augusta Investments Corporation is a privately held company in the
traveler accommodation industry. It sought protection under Chapter
11 of the U.S. Bankruptcy Code (Bankr. M.D. Fla. Case No. 20-06630)
on December 1, 2020. In the petition signed by Marco Kozlowski,
managing member, the Debtor disclosed between $1 million and $10
million in both assets and liabilities.
Judge Karen S. Jennemann oversees the case.
Aldo G. Bartolone, Jr., Esq., at BARTOLONE LAW, PLC, is the
Debtor's counsel.
BOY SCOUTS OF AMERICA: Insurers Allege Abuse Claims Fraud
---------------------------------------------------------
Law360 reports that a mass intake of sexual abuse claims against
the Boy Scouts of America has revealed potential fraud,
duplication, and ethical violations, according to a motion unsealed
Wednesday, Feb. 3, 2021, from insurers seeking a court-backed
examination of the documents and their preparation in the BSA's
Delaware Chapter 11 case.
The allegations were made in a public version of a motion for a
bankruptcy Rule 2004 examination filed on Jan. 22, 2021, by Century
Indemnity Company and Hartford Accident and Casualty Company, which
wrote policies the BSA relied on for liability protection, along
with several other insurers that could have to cover claims.
About Boy Scouts of America
The Boy Scouts of America -- https://www.scouting.org/ -- is a
federally chartered non-profit corporation under title 36 of the
United States Code. Founded in 1910 and chartered by an act of
Congress in 1916, the BSA's mission is to train youth in
responsible citizenship, character development, and self-reliance
through participation in a wide range of outdoor activities,
educational programs, and, at older age levels, career-oriented
programs in partnership with community organizations. Its national
headquarters is located in Irving, Texas.
The Boy Scouts of America and affiliate Delaware BSA, LLC sought
Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-10343) on
Feb. 18, 2020, to deal with sexual abuse claims.
Boy Scouts of America was estimated to have $1 billion to $10
billion in assets and at least $500 million in liabilities as of
the bankruptcy filing.
The Debtors have tapped Sidley Austin LLP as their bankruptcy
counsel, Morris, Nichols, Arsht & Tunnell LLP as Delaware counsel,
and Alvarez & Marsal North America, LLC as financial advisor. Omni
Agent Solutions is the claims agent.
The U.S. Trustee for Region 3 appointed a tort claimants' committee
and an unsecured creditors' committee on March 5, 2020. The tort
claimants' committee is represented by Pachulski Stang Ziehl &
Jones, LLP while the unsecured creditors' committee is represented
by Kramer Levin Naftalis & Frankel, LLP.
BOY SCOUTS OF AMERICA: Mediation Not Recommended on Appeal
----------------------------------------------------------
In the case captioned In re Boy Scouts of America, et al., Chapter
11, Debtors. CENTURY INDEMNITY COMPANY, as successor to CCI
INSURANCE COMPANY, as successor to INSURANCE COMPANY OF NORTH
AMERICA and INDEMNITY INSURANCE COMPANY OF NORTH AMERICA,
WESTCHESTER FIRE INSURANCE COMPANY, and WESTCHESTER SURPLUS LINES
INSURANCE COMPANY, Appellants, v. BOY SCOUTS OF AMERICA and
DELAWARE BSA, LLC, Appellees, Joint Administered C. A. No.
20-1643-RGA, BK Case No. 20-10343 (LSS), Bankruptcy BAP No. 20-58
(D. Del.), Judge Mary Pat Thynge of the United States District
Court for the District of Delaware recommended that the matter be
withdrawn from the mandatory referral for mediation and proceed
through the appellate process of the Court.
After conducting a screening process pursuant to paragraph 2(a) of
the Procedures to Govern Mediation of Appeals from the United
States Bankruptcy Court for the District of Delaware, Judge Thynge
determined that the issues involved in the case are not amenable to
mediation and that mediation at this stage would not be a
productive exercise, a worthwhile use of judicial resources nor
warrant the expense of the process.
Although the parties are involved in mediation regarding the
underlying bankruptcy case, the judge found that this mediation is
not focused on and is unrelated to the issues on appeal.
A full-text copy of Judge Thynge's recommendation dated January 26,
2021 is available at https://tinyurl.com/y2h7u6y5 from Leagle.com.
About Boy Scouts of America
The Boy Scouts of America -- https://www.scouting.org/ -- is a
federally chartered non-profit corporation under title 36 of the
United States Code. Founded in 1910 and chartered by an act of
Congress in 1916, the BSA's mission is to train youth in
responsible citizenship, character development, and self-reliance
through participation in a wide range of outdoor activities,
educational programs, and, at older age levels, career-oriented
programs in partnership with community organizations. Its national
headquarters is located in Irving, Texas.
The Boy Scouts of America and affiliate Delaware BSA, LLC sought
Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-10343) on
Feb. 18, 2020, to deal with sexual abuse claims.
Boy Scouts of America was estimated to have $1 billion to $10
billion in assets at least $500 million in liabilities as of the
bankruptcy filing.
The Debtors have tapped Sidley Austin LLP as their bankruptcy
counsel, Morris, Nichols, Arsht & Tunnell LLP as Delaware counsel,
and Alvarez & Marsal North America, LLC as financial advisor. Omni
Agent Solutions is the claims agent.
The U.S. Trustee for Region 3 appointed a tort claimants' committee
and an unsecured creditors' committee on March 5, 2020. The tort
claimants' committee is represented by Pachulski Stang Ziehl &
Jones, LLP while the unsecured creditors' committee is represented
by Kramer Levin Naftalis & Frankel, LLP.
BUILDERS FIRSTSOURCE: Moody's Hikes CFR to Ba2 Amid BMC Merger
--------------------------------------------------------------
Moody's Investors Service upgraded Builders FirstSource, Inc.'s
(BLDR) Corporate Family Rating to Ba2 from B1, Probability of
Default Rating to Ba2-PD from B1-PD. Moody's also upgraded the
company's senior secured notes to Ba2 from B1 and senior unsecured
note to B1 from B3 and upgraded the speculative grade liquidity
rating to SGL-1 from SGL-2. The outlook is stable. This concludes
the review initiated on August 31, 2020 when BLDR announced that it
would merge with BMC Stock Holdings, Inc.
The upgrade of BLDR's CFR to Ba2 from B1 reflects Moody's
expectation that BLDR will benefit from positive end market
dynamics. The merger with BMC in all stock transaction and the
repayment of BMC's debt creates a combined company with lower
leverage, greater scale and strong cash flow characteristics.
Moody's projects improvement in all credit metrics as BLDR
integrates the operations of BMC and that BLDR will maintain a very
good liquidity profile over the next two years.
"Builders FirstSource's all stock merger with BMC creates a
juggernaut with pro forma sales near $11.7 billion and is now the
largest distributor of building materials and services to the
homebuilding industry while deleveraging at the same time,"
according to Peter Doyle, a Moody's VP-Senior Analyst.
The following ratings are affected by the action:
Upgrades:
Issuer: Builders FirstSource, Inc.
Corporate Family Rating, Upgraded to Ba2 from B1
Probability of Default Rating, Upgraded to Ba2-PD from B1-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-2
Senior Secured Regular Bond/Debenture, Upgraded to Ba2 (LGD4) from
B1(LGD4)
Senior Unsecured Regular Bond/Debenture, Upgraded to B1 (LGD5)from
B3 (LGD5)
Outlook Actions:
Issuer: Builders FirstSource, Inc.
Outlook, Changed To Stable From Rating Under Review
RATINGS RATIONALE
BLDR's Ba2 CFR reflects Moody's expectation that the company will
benefit from growth in new home construction and residential repair
and remodeling activity, the main drivers of BLDR's revenue.
Moody's has a positive outlook for US Homebuilding with good growth
expected. Moody's projects that BLDR will maintain solid credit
metrics, such as adjusted debt-to-LTM EBITDA remaining slightly
below 2.0x over the next two years and adjusted free cash
flow-to-debt sustained above 17.5%. Moody's forecasts good
operating performance with adjusted EBITDA margin sustained at
about 8.5% versus 7.8% for LTM Q3 2020. However, BLDR may face
challenges integrating BMC in a transformational merger. BMC is a
sizeable organization with operations across 18 states and has
about 10,200 full-time employees. Integrating BMC into BLDR's
systems and other IT platforms without impacting operations while
facing strong competition is a daunting task. Additionally, the
combined entity remains heavily exposed to the domestic
homebuilding industry, which experienced significant volatility in
the past.
BLDR's SGL-1 Speculative Grade Liquidity Rating reflects Moody's
view that the company will maintain a very good liquidity profile
over the next two years, generating robust free cash flow over the
next two years and having ample revolver availability.
The stable outlook reflects Moody's expectation that BLDR will
follow conservative financial policies such as maintaining leverage
below 2.0x. A very good liquidity profile and Moody's expectation
that BLDR will successfully integrate BMC without impacting
operations further support the stable outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade:
- Debt-to-LTM EBITDA is sustained below 2.0x
- Preservation of its very good liquidity
- Maintain conservative financial policies
- Successful integration of BMC
Factors that could lead to a downgrade:
- Debt-to-LTM EBITDA is sustained above 3.5x
- The company's liquidity profile deteriorates
- Aggressive acquisition or share repurchase initiatives
Builders FirstSource, Inc., headquartered in Dallas, Texas, is a
national distributor of lumber, trusses, millwork, and other
building products, and a provider of construction services.
The principal methodology used in these ratings was Distribution &
Supply Chain Services Industry published in June 2018.
BULLET TRANSPORT: U.S. Trustee Unable to Appoint Committee
----------------------------------------------------------
The U.S. Trustee for Region 4 on Feb. 4 disclosed in a court filing
that no official committee of unsecured creditors has been
appointed in the Chapter 11 case of Bullet Transport, LLC.
About Bullet Transport LLC
Bullet Transport, LLC sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D.S.C. Case No. 20-04647) on Dec. 30, 2020.
At the time of the filing, the Debtor disclosed assets of between
$100,001 and $500,000 and liabilities of the same range.
Judge Helen E. Burris oversees the case. Robert H. Cooper, Esq.,
is Debtor's counsel.
BY CROWN PARENT: Moody's Completes Review, Retains B2 CFR
---------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of BY Crown Parent, LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
The B2 Corporate Family Rating reflects BY Crown Parent's very high
financial leverage, weak free cash flow generation and the
challenges in transitioning its business model from perpetual
licenses to Software as a Service. BY Crown Parent's revenue growth
turned negative during the COVID-19 pandemic but cost restructuring
and lower variable expenses have mitigated the impact on
profitability. Moody's expect revenue growth and profitability to
rebound in 2021 and leverage to decline toward the mid 6x and free
cash flow growing toward the mid-single digit percentages of total
debt over the next 12 to 18 months. BY Crown Parent's credit
profile is supported by its very good liquidity, good operating
scale, well-regarded Supply Chain Management software products, and
growing proportion of recurring revenues.
The principal methodology used for this review was Software
Industry published in August 2018.
CAMBIUM LEARNING: Moody's Completes Review, Retains B3 CFR
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Cambium Learning Group, Inc. and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Cambium Learning Group, Inc.'s B3 CFR reflects its very high
leverage, competitive and fragmented industry, and aggressive
financial policies given its private equity ownership. Cambium's
acquisitive growth strategy creates integration and leveraging
risk, and the company is still in the midst of integrating two
sizable acquisitions of AST and Rosetta Stone over the last 18
months However, the rating is supported by its well-recognized
brand name providing K-12 digital online curriculum and
assessments, solid growth prospects driven by the industry
transition to digital learning, high recurring revenue, and solid
margins supporting stable free cash flow generation.
The principal methodology used for this review was Business and
Consumer Service Industry published in October 2016.
CBL & ASSOCIATES: Says It Didn't Default on $1.1B Wells Fargo Loan
------------------------------------------------------------------
Law360 reports that mall owner CBL & Associates on Wednesday,
February 3, 2021, asked a Texas bankruptcy judge to throw out an
attempt by Wells Fargo to declare it in default on $1.1 billion in
loans and foreclose on dozens of malls, accusing the bank of
manufacturing reasons to seize its property. CBL opened the first
day of the virtual trial of its adversary action against Wells
Fargo with arguments that the claimed defaults were either not
defaults at all under the terms of the loan agreement, didn't cost
the lenders represented by Wells Fargo any money, or were waived by
the bank.
About CBL & Associates
CBL & Associates Properties, Inc. --
http://www.cblproperties.com/--is a self-managed,
self-administered, fully integrated real estate investment trust
(REIT) that is engaged in the ownership, development, acquisition,
leasing, management and operation of regional shopping malls,
open-air and mixed-use centers, outlet centers, associated centers,
community centers, and office properties.
CBL's portfolio is comprised of 107 properties totaling 66.7
million square feet across 26 states, including 65 high-quality
enclosed, outlet and open-air retail centers and 8 properties
managed for third parties. It seeks to continuously strengthen its
company and portfolio through active management, aggressive leasing
and profitable reinvestment in its properties.
CBL, CBL & Associates Limited Partnership and certain other related
entities filed voluntary petitions for reorganization under Chapter
11 of the U.S. Bankruptcy Code in Houston, Texas, on Nov. 1, 2020
(Bankr. S.D. Tex. Lead Case No. 20-35226).
The Debtors have tapped Weil, Gotshal & Manges LLP as their legal
counsel, Moelis & Company as restructuring advisor and Berkeley
Research Group, LLC as financial advisor. Epiq Corporate
Restructuring, LLC, is the claims agent.
CD 2005-CD1: Moody's Lowers Rating on Class G Certs to 'Ca(sf)'
---------------------------------------------------------------
Moody's Investors Service has downgraded the rating on one class in
CD 2005-CD1 Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2005-CD1 as follows:
Cl. G, Downgraded to Ca (sf); previously on Jun 14, 2019 Affirmed
Caa3 (sf)
RATINGS RATIONALE
The rating on Cl. G was downgraded due to the realized plus
anticipated losses from the remaining loans in the pool. One of the
two remaining loans, 2150 Joshua Path (30% of the pool), is in
specially servicing and already real estate owned. Additionally,
Cl. G has already experienced realized losses of 28% of its
original balance as a result of previously liquidated loans.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered the effect on the performance of
commercial real estate from the current weak US economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. As a result, the degree
of uncertainty around our forecasts is unusually high. Stress on
commercial real estate properties will be most directly stemming
from declines in hotel occupancies (particularly related to
conference or other group attendance) and declines in foot traffic
and sales for non-essential items at retail properties.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 31.1% of the
current pooled balance, compared to 47.1% at Moody's last review.
Moody's base expected loss plus realized losses is 5.9% of the
original pooled balance, essentially the same as at last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
https://bit.ly/3czXn4W.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or an
improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in September 2020.
DEAL PERFORMANCE
As of the January 15, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 99.6% to $16.3
million from $3.9 billion at securitization. The certificates are
collateralized by two mortgage loans.
Forty-six loans have been liquidated from the pool, resulting in an
aggregate realized loss of $225 million (for an average loss
severity of 37%). One loan, constituting 30.0% of the pool, is
currently in special servicing. The specially serviced loan is the
2150 Joshua Path Loan ($4.9 million), which is secured by an
approximately 41,000 square feet (SF), Class B, suburban office
building located in Hauppauge, NY. The loan transferred to special
servicing in July 2012 due to payment default and became REO in
April 2019. Property performance had significantly declined from
securitization due to lower occupancy and revenue. As of December
2020, the property was only 13% occupied and there are no new
recent leasing prospects.
The remaining performing loan represents 70.0% of the pool balance.
The loan is the ConnectiCare Office Building Loan ($11.4 million),
which is secured by an approximately 100,540 SF single tenant
occupied office property located in Farmington, Connecticut. The
property is fully occupied by ConnectiCare Insurance. The tenant
extended their lease in March 2018 for ten years, however, their
rent was reduced from $21.10 PSF to $14.33 PSF. The loan passed its
anticipated repayment date in July 2015 and has amortized 40% since
securitization. The loan's final maturity date is in July 2035. Due
to the single tenant exposure, Moody's incorporated a lit/dark
analysis and Moody's loan-to-value (LTV) and stressed debt service
coverage ratio (DSCR) are 106% and 1.13X, respectively, compared to
117% and 0.99X at the last review. Moody's stressed DSCR is based
on Moody's net cash flow (NCF) and a 9.25% stress rate the agency
applied to the loan balance.
CENTURIA FOODS: Seeks to Hire Larson & Zirzow as Legal Counsel
--------------------------------------------------------------
Centuria Foods, Inc. seeks approval from the U.S. Bankruptcy Court
for the District of Nevada to employ Larson & Zirzow, LLC, as its
general reorganization counsel.
The firm will render these services:
(a) prepare on behalf of the Debtor, as debtor in possession,
all necessary or appropriate motions, applications, answers,
orders, reports, and other papers in connection with the
administration of the Debtor's bankruptcy estate;
(b) take all necessary or appropriate actions in connection
with a sale, and/or a plan of reorganization and related disclosure
statement, and all related documents, and such further actions as
may be required in connection with the administration of the
Debtor's estate;
(c) take all necessary actions to protect and preserve the
Debtor's estate including the prosecution of actions on the
Debtor’s behalf, the defense of any actions commenced against the
Debtor, the negotiation of disputes in which the Debtor is
involved, and the preparation of objections to claims filed against
the Debtor’s estate; and
(d) perform all other necessary legal services in connection
with the prosecution of the Chapter 11 Case.
The firm received a retainer in the amount of $40,000.
The hourly rate of Matthew C. Zirzow, Esq., who is anticipated to
be the principal attorney working on this matter, is $550r, and the
hourly rate of Patricia Huelsman, who is anticipated to be the
principal paralegal working on this matter, is $220.
Mr. Zirzow assured the Court that the firm is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code and does not represent any interest adverse to the Debtor and
its estates.
The firm can be reached through:
Matthew C. Zirzow, Esq.
LARSON & ZIRZOW, LLC
850 E. Bonneville Ave.
Las Vegas, NV 89101
Tel: 702-382-1170
E-mail: mzirzow@lzlawnv.com
About Centuria Foods
Centuria Foods -- https://centuriafoods.com -- manufactures and
sells a full-spectrum of CBD oil products.
Centuria Foods, Inc. filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Nev. Case No.
21-50046) on Jan. 20, 2021. The petition was signed by Slavik
Nenaydokh, officer, director, and
designated responsible person. At the time of filing, the Debtor
diclosed $1 million to $10 million in both assets and liabilities.
Judge Bruce T. Beesley presides over the case.
Matthew C. Zirzow, Esq. at Larson & Zirzow, LLC, represents the
Debtor as counsel.
CENTURY 21: Seeks to Hire Berdon LLP as Tax Consultant
------------------------------------------------------
Century 21 Department Stores LLC and its affiliates seek approval
from the U.S. Bankruptcy Court for the Southern District of New
York to hire Berdon LLP.
The firm will render these services:
a. prepare C21 Department Stores Holdings LLC and L.I. 2000,
Inc.'s 2019 federal, state, and local income tax returns;
b. prepare Century 21 Gardens of Jersey, LLC's 2019 federal,
state, and local income tax returns;
c. prepare C21 Department Stores Holdings LLC and L.I. 2000,
Inc.'s 2020 federal, state, and local income tax returns;
d. provide C21 Philadelphia LLC with tax consulting services
in connection with a Pennsylvania Department of Revenue sales and
use tax audit for the period Jan. 1, 2014 to June 30, 2017.
e. respond to document and information requests in connection
with the Debtors' Chapter 11 Cases.
The firm will render at these rates:
Partner $550 - $750
Principal $425 - $575
Manager $300 - $475
Supervisor $240 - $325
Senior $155 - $230
Tax Associate $175 - $240
Semi-Senior $150
Staff Accountant $140
Bookkeeper $155 - 185
John Fitzgerald, audit partner at Berdon, assured the court that
the firm is a "disinterested person" as that term is defined in
section 101(14) of the Bankruptcy Code, as modified by section
1107(b) of the Bankruptcy Code.
The firm can be reached through:
John Fitzgerald, CPA
Berdon LLP
360 Madison Avenue
New York, NY 10017
Phone: 212-331-7411
Email: jfitzgerald@berdonllp.com
About Century 21
Century 21 Department Stores LLC and its affiliates are pioneers in
off-price retail offering access to designer brands at amazing
prices. They opened their iconic flagship location in downtown
Manhattan in 1961. As of the petition date, the Debtors have 13
stores across New York, New Jersey, Pennsylvania and Florida and an
online retail presence, operate seasonal pop-ups, and employ other
innovative retail concepts. Visit http://www.c21stores.comfor more
information.
Century 21 Department Stores LLC and its affiliates sought Chapter
11 protection (Bankr. S.D.N.Y. Lead Case No. 20-12097 on Sept. 10,
2020).
Century 21 was estimated to have $100 million to $500 million in
assets and liabilities as of the bankruptcy filing.
The Hon. Shelley C. Chapman is the case judge.
The Debtors have tapped Proskauer Rose LLP as their legal counsel,
Berkeley Research Group LLC as financial advisor, and Hilco
Merchant Resources LLC as liquidation consultant. Stretto is
Debtors' claims agent. Berdon LLP as serves as Debtors' tax
preparer and consultant.
On September 16, 2020, the Office of the United States Trustee
appointed the official committee of unsecured creditors pursuant to
Section 1102(a)(1) of the Bankruptcy Code.
CGE REAL ESTATE: McKnight Violated Stay Order, Court Says
---------------------------------------------------------
Judge Mark X. Mullin of the United States Bankruptcy Court for the
Northern District of Texas, Fort Worth Division found that Aaron
Cain McKnight willfully and contemptuously failed to comply with
the Stay Order entered in the CGE Holdings Bankruptcy Case.
The origin of the dispute involves residential real property
located in Dallas, Texas which is owned by CGE Holdings.
On July 27, 2018, CGE Holdings executed a Note made payable to YYP
Group, Ltd. in the original principal amount of $1.4 million. The
Note is secured by a lien on the property. YYP is a family limited
partnership. The general partner of YYP is a corporation, of which
Mr. George Kimeldorf is President.
To further secure payment of the note, McKnight signed a guaranty,
which states that he "is the owner of a direct or indirect interest
in [CGE Holdings], and [McKnight] will directly benefit from
[Plaintiff's] making the Loan to [CGE Holdings]."
On July 27, 2018, McKnight and CGE Holdings entered into a Joint
Venture Agreement which provided, in relevant part, that it shall
be limited to the business of financing the purchase of the
property. The agreement also provided that McKnight and his family
could stay in the house without paying any rent to CGE Holdings.
McKnight has lived on the property since July 2018 and, as of the
trial date, continuous to occupy the property.
CGE Holdings defaulted on the Note by failing to make the first
payment due. YYP accelerated the Note on September 13, 2018 and
posted the property for a foreclosure sale scheduled on January 2,
2019. On January 1, 2019, CGE Holdings filed its bankruptcy case.
On January 23, 2019, YYP filed a motion to lift the Section 362
automatic stay in the bankruptcy case to permit the YYP to pursue
its rights and remedies under the Note and lien. Prior to the
hearing on the motion, Mr. Kimeldorf testified that the parties
agreed to the terms of the Stay Order, which was intended to
provide CGE Holdings and McKnight with approximately two months to
sell or refinance the property and pay off the Note. The Stay
Order provided further that if the parties were not successful in
paying off the Note by May 6, 2019, YYP was authorized to proceed
with a May 7, 2019 foreclosure sale of the property. It also
provided that CGE Holdings and/or anyone acting on its behalf or at
its direction were prohibited from seeking injunctive relief in any
attempt to delay, impede, postpone, or otherwise interfere with
YYP's rights in the Stay Order and the property.
Ultimately, CGE Holdings and McKnight were not successful in paying
off the Note by the May 6, 2019 deadline in the Stay Order.
Pursuant to the terms of the Stay Order, YYP posted the property
for a scheduled May 7, 2019 foreclosure sale.
On May 6, 2019, McKnight filed a state court lawsuit seeking an ex
parte temporary restraining order and injunction against YYP and
asserting that the property was his "residence," that he had an
alleged "right of ownership" in the property, and that he "could
elect to sell the property or stay in the house with his family."
The state court entered a temporary restraining order and set the
lawsuit for an evidentiary hearing. Thereafter, on August 30,
2019, the state court issued a temporary injunction further
enjoining YYP from exercising its rights regarding the property.
On appeal, the Court of Appeals for the Fifth District of Texas at
Dallas reversed the state court and ordered the temporary
injunction be dissolved and the state court lawsuit against YYP be
dismissed.
YYP then filed a Complaint asserting that McKnight should be held
in civil contempt for violating the Stay Order and that McKnight's
willful disregard of the Stay Order warrants sanctions to
compensate YYP for its losses.
McKnight asserted the following affirmative defenses:
i. The Plaintiff's Complaint fails to state a claim upon which
relief may be granted;
ii. McKnight did not enter into the Stay Order with the
Plaintiff;
iii. McKnight did not consent to the Stay Order as required by
the Joint Venture Agreement;
iv. McKnight is not in privity of the Stay Order; and
v. The Plaintiff has not suffered a compensable injury.
McKnight alleged that all of his actions, including filing and
prosecuting the state court lawsuit, were taken in his individual
capacity and not on behalf of CRG Holdings as required by the Stay
Order.
Judge Mullin, however, found that the credible evidence before the
Court includes the following uncontroverted facts:
i. McKnight's Guaranty states that he is the owner of a direct
or indirect interest in CGE Holdings;
ii. McKnight paid CGE Holdings's lawyer to file the CGE
Holdings Bankruptcy Case;
iii. McKnight participated in the CGE Holdings Bankruptcy Case
and admitted that his role was advising Russell on what to do;
iv. CGE Holdings's bankruptcy counsel provided McKnight with a
copy of the Stay Order and specifically instructed McKnight to
"[P]lease read the attached [Stay Order] carefully, it contains
important information which you are responsible, in compliance with
the bankruptcy proceedings";
v. McKnight had actual notice of the Stay Order as evidenced
by the email referenced above and by McKnight's admission in his
state court lawsuit;
vi. McKnight contends that the property is his residence, that
he had an alleged right of ownership in the property and that he
could elect to sell the property or stay in the house with his
family;
vii. McKnight and CGE Holdings were the only parties to the
Joint Venture Agreement that was limited exclusively to the
property;
viii. McKnight was a party to several email communications
with the YYP and others regarding the property and issues covered
by the Stay Order, where McKnight's, Laird's, and CGE Holdings's
names were used interchangeably;
ix. Mr. Kimeldorf's credible testimony -- that YYP believed
the prohibition in the Stay Order was intended to include McKnight
-- was not controverted by any evidence;
x. McKnight willfully filed and prosecuted the state court
lawsuit in direct violation of the Stay Order; and
xi. McKnight's actions were willful and malicious, causing
injury to YYP.
Based on the clear, credible, and uncontroverted evidence before
the Court, Judge Mullin thus found that McKnight:
(i) actively participated in the CGE Holdings Bankruptcy
Case;
(ii) actively participated in the negotiations culminating in
the agreed Stay Order;
(iii) knew he had to comply with the prohibition contained in
the Stay Order; and
(iv) willfully violated the Stay Order by filing and
prosecuting the state court lawsuit.
Therefore, Judge Mullin concluded that YYP has satisfied its burden
to establish that:
(1) the Stay Order was in effect;
(2) the Stay Order prohibited McKnight from taking certain
actions and conduct regarding the property; and
(3) McKnight willfully and maliciously failed to comply with
the Stay Order.
Judge Mullin found and concluded that an appropriate remedy for
McKnight's contemptuous conduct is sanctions against McKnight to
reimburse YYP its reasonable and necessary attorney's fees and
costs in the amount of $186,600.
Judge Mullin also found that, because of McKnight's willful
violation of the Stay Order and his continued occupation of the
property -- rent free – YYP was prevented from obtaining
possession of the property and realizing rental income from May 7,
2019 through the trial date. Mr. Kimeldorf's credible and
uncontroverted testimony was that the fair market rental charge for
the property is at least $15,000.00 per month based on comparable
rentals for similar properties.
Thus, Judge Mullin further found and concluded that an additional
sanction should be issued against McKnight to reimburse YYP for the
rental value of the property -- that McKnight continues to occupy
-- in the amount of $288,000,69 representing the fair and
reasonable rental rate for the property from May 7, 2019 through
the trial date.
The case is IN RE: CGE REAL ESTATE HOLDINGS, LLC, Chapter 11,
Debtor. YYP GROUP, LTD, Plaintiff, v. CGE REAL ESTATE HOLDINGS,
LLC, RUSSELL ALLEN LAIRD, AND AARON CAIN McKNIGHT, Defendants, Case
No. 19-40007-MXM-11, Adversary No. 19-4080-MXM (Bankr. N.D. Tex.).
A full-text copy of Judge Mullin's findings of fact and conclusion
of law, dated January 26, 2021, is available at
https://tinyurl.com/y2ud9spp from Leagle.com.
About CGE Real Estate
CGE Real Estate Holdings, LLC, based in Fort Worth, TX, filed a
Chapter 11 petition (Bankr. N.D. Tex. Case No. 19-40007) on Jan. 1,
2019. In the petition signed by Russell Alan Laird, managing
member, the Debtor estimated $2,210,000 in assets and $1,569,000 in
liabilities. Eric A. Liepins, Esq., at Eric A. Liepins, P.A.,
serves as bankruptcy counsel to the Debtor.
CHESAPEAKE ENERGY: Plans Cut Staff by 15% Prior to Bankruptcy Exit
------------------------------------------------------------------
Sergio Chapa of Bloomberg News reports that Chesapeake Energy plans
to cut 15% of its workforce as the shale-gas pioneer prepares to
exit from bankruptcy.
Chief Executive Officer Doug Lawler called the decision "painful"
but said the cuts were necessary to execute the company's new
business plan given current commodity prices, according to an email
he sent to employees that was seen by Bloomberg. Chesapeake
spokesman Gordon Pennoyer authenticated the email.
Once in the vanguard of innovative drillers that cracked the shale
code and upended global energy markets, Chesapeake spent much of
the past decade struggling to shoulder massive debts incurred by
late co-founder Aubrey McClendon.
About Chesapeake Energy
Headquartered in Oklahoma City, Chesapeake Energy Corporation's
(NYSE: CHK) operations are focused on discovering and developing
its large and geographically diverse resource base of
unconventional oil and natural gas assets onshore in the United
States.
Chesapeake Energy and its affiliates sought Chapter 11 protection
(Bankr. S.D. Tex. Lead Case No. 20-33233) on June 28, 2020, after
reaching terms of a Chapter 11 plan of reorganization to eliminate
approximately $7 billion of debt.
The Debtors tapped Kirkland & Ellis LLP as legal counsel, Jackson
Walker LLP as co-counsel and conflicts counsel, Alvarez & Marsal as
restructuring advisor, Rothschild & Co and Intrepid Financial
Partners as financial advisors, and Reevemark as communications
advisor. Epiq Global is the claims agent, maintaining the page
http://www.chk.com/restructuring-information
Wachtell, Lipton, Rosen & Katz serves as legal counsel to
Chesapeake Energy's Board of Directors.
MUFG Union Bank, N.A., the DIP facility agent and exit facilities
agent, has tapped Sidley Austin LLP as legal counsel, RPA Advisors
LLC as financial advisor, and Houlihan Lokey Capital Inc. as
investment banker.
Davis Polk & Wardell LLP and Vinson & Elkins L.L.P. serve as legal
counsel to an ad hoc group of first lien last out term loan lenders
while Perella Weinberg Partners and Tudor, Pickering, Holt & Co.
serve as the group's investment bankers.
Franklin Advisers, Inc., has tapped Akin Gump Strauss Hauer & Feld
LLP as legal counsel, FTI Consulting, Inc. as financial advisor,
and Moelis & Company LLC as investment banker.
On July 9, 2020, the Office of the U.S. Trustee appointed a
committee to represent unsecured creditors in Debtors' Chapter 11
cases. The unsecured creditors' committee has tapped Brown
Rudnick, LLP and Norton Rose Fulbright US, LLP as its legal
counsel, and AlixPartners, LLP as its financial advisor.
On July 24, 2020, the bankruptcy watchdog appointed a committee of
royalty owners. The royalty owners' committee is represented by
Forshey & Prostok, LLP.
CHRISTOPHER & BANKS: McCarter, Russell Represent Utility Companies
------------------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure,
the Law Firm of Russell R. Johnson III, PLC and McCarter & English,
LLP submitted a verified statement to disclose that they are
representing the utility companies in the Chapter 11 cases of
Christopher & Banks Corporation, et al.
The names and addresses of the Utilities represented by the Firm
are:
a. American Electric Power
Attn: Dwight C. Snowden
American Electric Power
1 Riverside Plaza, 13th Floor
Columbus, Ohio 43215
b. The Connecticut Light & Power Company
Public Service Company of New Hampshire
Attn: Honor S. Heath, Esq.
Eversource Energy
107 Selden Street
Berlin, CT 06037
c. Baltimore Gas and Electric Company
Commonwealth Edison Company
Delmarva Power & Light Company
Assistant General Counsel
Exelon Corporation
2301 Market Street, S23-1
Philadelphia, PA 19103
d. The Cleveland Electric Illuminating Company
Ohio Edison Company
Monongahela Power Company
Metropolitan Edison Company
Toledo Edison Company
Pennsylvania Electric Company
West Penn Power Company
Pennsylvania Power Company
Potomac Edison Company
Attn: Kathy M. Hofacre
FirstEnergy Corp.
76 S. Main St., A-GO-15
Akron, OH 44308
e. CenterPoint Energy Resources Corp.
Jeanneta Johnson
CenterPoint Energy, Inc.
1111 Louisiana St.
Houston, TX 77002
The nature and the amount of claims (interests) of the Utilities,
and the times of acquisition thereof are as follows:
a. The following Utilities have unsecured claims against the
above-referenced Debtors arising from prepetition utility usage:
American Electric Power, Baltimore Gas and Electric Company,
Commonwealth Edison Company, Delmarva Power & Light Company, The
Connecticut Light & Power Company, Public Service Company of New
Hampshire, CenterPoint Energy Resources Corp., The Cleveland
Electric Illuminating Company, Ohio Edison Company, Monongahela
Power Company, Metropolitan Edison Company, Toledo Edison Company,
Pennsylvania Electric Company, West Penn Power Company,
Pennsylvania Power Company and Potomac Edison Company.
b. For more information regarding the claims and interests of
the Utilities in these jointly-administered cases, refer to the
Objection of Certain Utility Companies to the Debtors' Motion
Pursuant To 11 U.S.C. section 105(a) and 366 For Interim and Final
Orders (I) Approving Debtors' Proposed Form of Adequate Assurance
of Payment To Utility Providers, (II) Establishing Procedures For
Determining Adequate Assurance of Payment For Future Utility
Services, and (III) Prohibiting Utility Providers From Altering,
Refusing, or Discontinuing Utility Services filed in the
above-captioned, jointly-administered, bankruptcy cases.
The Law Firm of Russell R. Johnson III, PLC was retained to
represent the foregoing Utilities in January 2021. The
circumstances and terms and conditions of employment of the Firm by
the Companies is protected by the attorney-client privilege and
attorney work product doctrine.
Counsel for American Electric Power, et al. can be reached at:
James A. Kellar, Esq.
McCARTER & ENGLISH, LLP
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102
Telephone: (973) 622-4444
Email: jkellar@mccarter.com
- and -
Russell R. Johnson III, Esq.
John M. Craig, Esq.
Law Firm of Russell R. Johnson III, PLC
2258 Wheatlands Drive
Manakin-Sabot, VA 23103
Telephone: (804) 749-8861
Facsimile: (804) 749-8862
Email: russell@russelljohnsonlawfirm.com
A copy of the Rule 2019 filing is available at
https://bit.ly/36DG7rC at no extra charge.
About Christopher & Banks
Christopher & Banks Corporation (OTC: CBKC) is a Minneapolis-based
specialty retailer featuring exclusively designed privately branded
women's apparel and accessories. As of Jan. 13, 2021, Christopher
& Banks operates 449 stores in 44 states consisting of 315 MPW
stores, 76 Outlet stores, 31 Christopher & Banks stores, and 28
stores in its women's plus size clothing division CJ Banks. It
also operates the www.ChristopherandBanks.com eCommerce website.
Christopher & Banks and two affiliates sought Chapter 11 protection
(Bankr. D.N.J. Lead Case No. 21-10269) on Jan. 13, 2021. As of
Dec. 14, 2020, Christopher & Banks had $166,396,185 in assets and
$105,639,182 in liabilities.
Judge Andrew B. Altenburg Jr. oversees the cases.
The Debtors tapped Cole Schotz P.C. as their legal counsel, BRG LLC
as financial advisor, and B. Riley Securities Inc. as investment
banker. Omni Management Solutions is the claims agent.
CINEMEX USA: Lakeside's Bid to Compel Compliance Party Granted
--------------------------------------------------------------
In the case captioned IN RE: CINEMEX USA REAL ESTATE HOLDINGS, INC,
et al., Chapter 11, Debtors, Case No. 20-14695-BKC-LMI, Jointly
Administered (Bankr. S.D. Fla.), Judge Laurel M. Isicoff of the
United States Bankruptcy Court for the Southern District of
Florida, Miami Division granted in part and denied in part the
motion filed by Cobb Lakeside, LLC to compel compliance with 11
U.S.C. Section 365(d)(3).
The judge found that there is no administrative claim for unpaid
rent for the period March 20, 2020 through June 4, 2020, but there
is an administrative claim for unpaid rent from June 5, 2020
forward.
Debtors Cinemex USA Real Estate Holdings, Inc., Cinemex Holdings
USA, Inc., and CB Theater Experience LLC filed voluntary Chapter 11
petitions on April 25, 2020, and April 26, 2020. The Debtors are
in the movie theater business and operated 41 movie theaters across
12 states. At the time of filing, the Debtors, collectively, were
party to 41 unexpired real property leases for where they operate
upscale dine-in movie theaters. One of those leases is between the
debtor CB Theater as lessee and Cobb Lakeside, LLC as Lessor. The
Lakeside Lease relates to a movie theater property located at the
Lakeland Village Shopping Center in Lakeland, Florida.
Immediately after the bankruptcy cases were filed, the Debtors
sought authority to reject several leases and, with respect to the
balance of the leases, sought to delay or excuse payment of rent.
The Debtors sought to delay payment of administrative rent for a
period of 60 days as authorized by 11 U.S.C. Section 365(d)(3).
Further, the Debtors requested that all lease payments be suspended
completely.
CB Theater argued that it is entitled to the relief sought for
several reasons: when Florida Governor Ron DeSantis ordered all
movie theaters to close, it was impossible for CB Theater to
operate a movie theater, as required by the Lakeside Lease; the
purposes of the Lakeside Lease were frustrated by the COVID-19
pandemic itself -- because even after movie theaters were reopened
in Florida (albeit at reduced attendance) few people wanted to
attend, and movie studios curtailed all new movie releases.
Lakeside countered that Governor DeSantis authorized movie theaters
to reopen at 50% capacity as of June 5, 2020, and CB Theater's
decision not to reopen on that date does not mean that CB Theater
could not open on that date. Basically, Lakeside argued, CB
Theater's decision to delay reopening was a financial decision, and
that does not excuse performance under either doctrine.
Judge Isicoff found that CB Theater was excused from paying rent
until the Lakeside Theater was allowed to reopen. However, the
judge agreed with Lakeside that after June 5, 2020, there was no
frustration of purpose as it was already possible for CB Theater to
operate a movie theater.
"There is no question that the COVID-19 pandemic was completely
unforeseeable (although a slow down in audience attendance or a
dearth of new releases is not), and certainly not the fault of
either contract party. But, once the Lakeside Theater was allowed
to reopen, it was possible for CB Theater to reopen; CB Theater
chose not to do so for what appears, based on the Marti
declaration, to be primarily economic concerns. Therefore CB
Theater's performance under the Lakeside Lease from June 5, 2020
onward is not excused under the doctrine of frustration of
purpose," explained the judge.
Judge Isicoff also found that while there was no rent due for the
period of closure, the term of the Lakeside Lease (unless that
lease is rejected) is extended by the amount of time the movie
theater was closed. The judge based this on Article 8 of the
Lakeside Lease which states "the period for the commencement or
completion thereof shall be extended for a period equal to such
delay." Thus, the judge concluded that the time of non-performance
(not being able to operate a movie theater and pay rent) will be
added to the end of the lease term, and along with that extension,
the obligation to pay the rent.
In summary, Judge Isicoff ruled that:
(1) CB Theater is not required to pay Lakeside rent for the
time that the Lakeside Theater was closed.
(2) To the extent the Lakeside Lease is not rejected, the
lease term is extended for an amount of time equal to the time the
Lakeside Theater was closed under state law.
(3) As for the balance of the lease payments, that is, from
June 5, 2020 forward, those are payable in full and, therefore, are
unpaid administrative expenses.
(4) Going forward, CB Theater will be required to make the
full lease payments in accordance with the terms of the Lakeside
Lease until the lease is rejected, or the parties come to other
terms.
A full-text copy of Judge Isicoff's memorandum opinion dated
January 26, 2021 is available at https://tinyurl.com/y4b2geyk from
Leagle.com.
About Cinemex Holdings
Cinemex Holdings USA, Inc., operates movie theater chain CMX. CMX
provides state-of-the-art technology that can be enjoyed through
different types of experiences: CMX CinéBistro, the luxury
dine-in, and in-seat service; CMX Market Cinema, the gourmet grab
and go movie experience and CMX Cinemas, the upgraded traditional
theater with classic concessions. It also features the trendy and
exclusive CMX Stone Sports Bar at selected theaters, making CMX the
preferred entertainment destination.
Cinemex USA Real Estate Holdings Inc. and Cinemex Holdings USA
sought protection under Chapter 11 of the Bankruptcy Code (Bankr.
S.D. Fla. Case Nos. 20-14695 and 20-14696) on April 25, 2020. On
April 26, 2020, CB Theater Experience, LLC, filed a Chapter 11
petition (Bankr. S.D. Fla. Case No. 20-14699). The cases are
jointly administered under Case No. 20-14695.
At the time of the filing, the Debtors each disclosed assets of
between $100 million and $500 million and liabilities of the same
range.
Quinn Emanuel Urquhart & Sullivan, LLP and Bast Amron, LLP serve as
the Debtors' bankruptcy counsel.
CLEAR CHANNEL: Moody's Rates Proposed $1BB Unsecured Note Caa2
--------------------------------------------------------------
Moody's Investors Service affirmed Clear Channel Outdoor Holdings,
Inc's B3 Corporate Family Rating and assigned a Caa2 rating to the
proposed $1 billion senior unsecured note. Clear Channel's existing
senior secured credit facility and senior secured notes were
affirmed at B1 while the existing senior unsecured notes issued by
affiliate, Clear Channel Worldwide Holdings, Inc (CCW), were
affirmed at Caa2. The outlook remains negative.
The net proceeds of the $1 billion senior unsecured note due 2028
will be used to repay $940 million of the existing senior unsecured
notes issued at subsidiary, CCW. The transaction increases
outstanding debt slightly, but extends a portion of its debt
maturity schedule. Overall interest expense is likely to be largely
unchanged.
Despite elevated leverage levels and negative free cash flow,
liquidity is projected to be adequate over the next year as a
result of Clear Channel's large cash balance and the Speculative
Grade Liquidity (SGL) rating remains unchanged at SGL-3.
Assignments:
Issuer: Clear Channel Outdoor Holdings, Inc.
Gtd Senior Unsecured Regular Bond/Debenture, Assigned Caa2 (LGD5)
Outlook Actions:
Issuer: Clear Channel International B.V.
Outlook, Remains Negative
Issuer: Clear Channel Outdoor Holdings, Inc.
Outlook, Remains Negative
Issuer: Clear Channel Worldwide Holdings, Inc.
Outlook, Remains Negative
Affirmations:
Issuer: Clear Channel International B.V.
Senior Secured Regular Bond/Debenture, Affirmed B2 (LGD3)
Issuer: Clear Channel Outdoor Holdings, Inc.
Probability of Default Rating, Affirmed B3-PD
Corporate Family Rating, Affirmed B3
Senior Secured Bank Credit Facility, Affirmed B1 (LGD3)
Senior Secured Regular Bond/Debenture, Affirmed B1 (LGD3)
Issuer: Clear Channel Worldwide Holdings, Inc.
Senior Unsecured Regular Bond/Debenture, Affirmed Caa2 (LGD5)
RATINGS RATIONALE
Clear Channel's B3 CFR reflects the ongoing impact of the
coronavirus pandemic on the global economy and outdoor advertising
spending which has led to extremely high leverage (over 30x as of
Q3 2020 excluding Moody's standard lease adjustment) and decreased
operating cash flow. Moody's expects leverage will continue to
increase and operating cash flow will decrease through Q1 2021,
before beginning to improve in Q2 2021. Recent expense and capex
reductions are projected to offset only a portion of the declines
in profitability and cash flow arising from the pandemic and
economic recession.
While Clear Channel has diversified operations primarily in the
U.S. and Europe, there is significant exposure to larger markets
which have been more adversely impacted by the coronavirus and
elevated declines in operating performance in both divisions. The
outdoor advertising industry also remains vulnerable to reduced
consumer ad spending, with contract terms generally shorter than in
prior periods. As result, Moody's expect the outdoor industry will
be affected more rapidly than in prior recessions, although
performance should improve quicker than in previous recoveries due
to the lower commitment level and ease of initiating new outdoor
campaigns.
Clear Channel benefits from its market position as one of the
largest outdoor advertising companies in the world with diversified
international operations. The ability to convert traditional static
billboards to digital provides growth opportunities which Moody's
expects will lead to higher revenue and EBITDA with appeal to a
broader range of advertisers after the pandemic subsides. Outdoor
advertising is not likely to suffer from disintermediation as other
traditional media outlets have and will benefit from restrictions
of the supply of additional billboards (particularly in the US),
which helps support advertising rates and very high asset
valuations.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered the effect on the performance of
outdoor advertising revenue from the current weak economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. As a result, the degree
of uncertainty around Moody's forecasts is unusually high. Moody's
regards the coronavirus outbreak as a social risk under its ESG
framework, given the substantial implications for public health and
safety.
A governance impact that Moody's considers in Clear Channel's
credit profile is the change in financial policy. Prior to the
separation with iHeartCommunications, Inc. (iHeart) in Q2 2019,
Clear Channel paid material dividends to its prior parent company
that led to reduced free cash flow and high leverage levels.
Moody's expects that Clear Channel will pursue a more conservative
policy after the pandemic abates, but will remain focused on
preserving liquidity in the near term.
The SGL-3 rating reflects Moody's expectation that Clear Channel
will maintain adequate liquidity in the near term. Cash on the
balance sheet was $845 million at the end of Q3 2020 following the
$375 million senior secured notes issued in August 2020 through
indirect wholly-owned subsidiary, Clear Channel International B.V.
(CCIBV). Clear Channel had $130 million drawn on the $175 million
revolver due 2024 ($20mm of L/Cs outstanding) as of Q3 2020 pro
forma for the $20 million revolver repayment in October 2020.
Liquidity also benefited from the sale of its position in Clear
Media for $216 million in net proceeds in Q2 2020.
Free cash flow (FCF) was slightly negative in prior years and
negative $205 million YTD Q3 2020. Moody's expects FCF will
continue to be negative despite efforts to cut capex to the $125
million range in 2020 from $221 million in 2019. FCF is projected
to improve in Q2 2021, but will remain negative in 2021 and 2022.
Additional sales of non-core assets are possible going forward,
especially outside of North America, which could provide Clear
Channel with an additional source of liquidity.
The term loan is covenant lite and the revolver is subject to a
first lien net leverage ratio of 7.6x if the balance of the
revolver is greater than $0 and undrawn letters of credit exceed
$10 million. If the total leverage ratio is equal to or less than
6.5x, the revolver will only be subject to the first lien net
leverage ratio when greater than 35% is drawn. In June 2020, Clear
Channel amended the Senior Secured Credit Agreement to suspend the
springing financial covenant of the Revolving Credit Facility from
the third quarter of 2020 through the second quarter of 2021.
During the suspension period, Clear Channel is subject to a minimum
liquidity test of $150 million. Moody's expects Clear Channel will
need an amendment to the revolver covenant prior to the expiration
of the suspension period to maintain full access to the revolver.
The negative outlook reflects Moody's expectation of continuing
declines in revenue and EBITDA as a result of the pandemic through
Q1 2021, before improving in Q2 2020 as trough quarters from 2020
begin to roll off. Profitability at the European business that has
a higher percentage of lower margin street furniture and transit
revenue located in large markets, has been especially hard hit, but
performance will begin to improve in Q2 2021. Moody's expects Clear
Channel will have adequate liquidity over the next year, although
the company will be reliant on its cash balance for liquidity as
FCF is projected to remain negative through 2022. Moody's expects
leverage levels will improve to the 14x range by the end of 2021
and to under 11x by the end of 2022 as advertising spend improves
after the impact of the pandemic subsides.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade is not expected in the near term for Clear Channel
due to the impact of the pandemic and extremely high leverage
levels. However, an upgrade could occur if leverage decreased below
7x with a positive free cash flow to debt ratio in the mid-single
digits and an EBITDA minus capex to interest coverage ratio of over
1.5x. An adequate liquidity profile with a sufficient cushion of
compliance with financial covenants would also be required.
The ratings could be downgraded if leverage exceeds 10x for an
extended period of time once the pandemic subsides or if the
liquidity position deteriorated such that there was an increased
possibility of default or a distressed exchange. An EBITDA minus
capex to interest coverage ratio sustained below 1x or inability to
obtain an amendment on its financial covenant applicable to its
revolver if needed in the future would also lead to a downgrade.
Clear Channel Outdoor Holdings, Inc. (CCO), headquartered in San
Antonio, Texas, is a leading global outdoor advertising company
that generates LTM revenues of about $2.1 billion as of Q3 2020.
iHeartCommunications, Inc. (iHeart) previously owned 89% of CCO and
former iHeart debtholders obtained a substantial portion of CCO's
equity following iHeart's exit from bankruptcy in Q2 2019.
The principal methodology used in these ratings was Media Industry
published in June 2017.
CLEVELAND-CLIFF INC: Fitch Upgrades Senior Unsecured Notes to 'B'
-----------------------------------------------------------------
Fitch Ratings has upgraded Cleveland-Cliffs, Inc.'s (CLF)
guaranteed unsecured notes to 'B'/'RR4' from 'B-'/'RR5'. The notes
were removed from Rating Watch Positive. The upgrade of CLF's
guaranteed senior unsecured notes is due to updated recovery
assumptions following the acquisition of ArcelorMittal USA (AM
USA), including a higher going concern (GC) EBITDA driven by CLF's
addition of approximately 17 million tons of steelmaking capacity
and limited new secured debt.
In addition, Fitch has affirmed CLF's Long-Term Issuer Default
Rating (IDR) at 'B'. Fitch has also affirmed AK Steel Corporation's
(CLF's subsidiary) Long-Term IDR at 'B'. Additionally, Fitch has
affirmed CLF's asset-based loan (ABL) credit facility, CLF's first
lien secured notes and AK Steel's first lien secured notes at
'BB'/'RR1', and affirmed CLF's unsecured convertible notes, the CLF
unsecured notes not benefiting from guarantees and AK Steel's
unsecured guaranteed notes at 'CCC+'/'RR6'. The Rating Outlook is
Positive.
The Positive Rating Outlook reflects the closing of the acquisition
of substantially all operations of AM USA for approximately $1.4
billion. Fitch views the acquisition as deleveraging while
resulting in increased size, scale and end-market diversification.
Fitch could resolve the Positive Rating Outlook if total debt to
EBITDA is expected to trend below 4.0x or below while FCF is
expected to be positive and is allocated toward gross debt
repayment.
CLF's ratings reflect its vertical integrated operating profile,
its self-sufficiency in iron ore, its focus on higher value-added
steel production and its electric arc furnace (EAF)-focused,
Toledo, OH-based hot briquetted iron (HBI) facility. Fitch believes
Cliffs' internal requirements provide a stable source of iron ore
demand. Cliffs' ratings also reflect subsidiary AK Steel
Corporation's focus on higher value-added steels, which have higher
barriers to entry, fixed-price contracts and premium pricing and
are less susceptible to imports.
Rating concerns include Cliffs' high exposure to the automotive
market, which Fitch expects to continue to be negatively affected
by the coronavirus pandemic in 2021, resulting in lower shipments
compared with 2019, however Fitch expects significantly higher
EBITDA and significantly lower leverage in 2021 compared with 2020.
Fitch expects the acquisition to increase end-market
diversification and lower Cliffs' concentration in the auto market,
which Fitch views as a credit positive. However, auto market
exposure will remain relatively high.
Fitch also expects total debt to EBITDA to be significantly lower
in 2021 compared with 2020 and to trend lower over the rating
horizon as the economy and steel fundamentals recover, combined
with the addition of AM USA operations. Fitch forecasts Cliffs to
have adequate liquidity and the company has no material maturities
until 2024. However, Fitch views this as partially offset by
expectations for slightly elevated total debt to EBITDA in 2021 and
high interest and pension expenses, including the assumption of
$1.47 billion in pension/other post-employment benefit (OPEB)
obligations from AM USA.
KEY RATING DRIVERS
AM USA Acquisition: Cliffs closed the acquisition of ArcelorMittal
USA's operations for approximately $1.4 billion with a combination
of $500 million of Cliffs' common stock, $373 million of nonvoting
preferred stock and $505 million in cash. Fitch views the
acquisition as a credit positive, as it is deleveraging, creates
the opportunity for debt reduction and results in increased size,
scale and end-market diversification. CLF is now the largest
flat-rolled steel producer and largest iron ore pellet producer in
North America.
The transaction is also expected to improve liquidity, as the ABL
facility has been increased to $3.5 billion from $2.0 billion.
Fitch believes total debt to operating EBITDA could trend to 3.5x
or below by YE22 if Cliffs utilizes excess cash to reduce debt.
Lower Concentration in Auto: Approximately 66% of AK Steel's 2019
sales were to the automotive market, whereas roughly 27% of AM
USA's 2019 sales were to the automotive market. Fitch views the
increased end-market diversification and reduced concentration in
the auto market positively. However, Cliffs will still have
relatively high auto market exposure pro forma the acquisition and
auto demand declined significantly in 2020, resulting in
significantly lower EBITDA generation and elevated leverage.
AK Steel is one of a few North American steel producers capable of
producing some of the most sophisticated grades of advanced
high-strength steels and value-added stainless steel products, and
the only producer of non-oriented electrical steel, a critical
component of hybrid/electric vehicles' motors. AK Steel also
produces steel grades critical to automotive light-weighting steel
trends, and it is well positioned longer term to benefit from an
auto recovery and the transition to electric cars.
AK Steel Merger: Cliffs consummated a merger with AK Steel, its
second-largest iron ore pellet customer, on March 13, 2020, at
which point AK Steel became Cliffs' wholly owned subsidiary.
Cliffs' debt outstanding increased by approximately $2.24 billion
in 1Q20, and Cliffs assumed significant pension obligations of AK
Steel as part of the merger. However, Fitch views the transaction
as relatively leverage-neutral on a normalized basis, with
additional earnings offsetting the increase in debt.
The transaction created an integrated steel producer that is more
than 100% self-sufficient in iron ore, resulting in the ability to
continue to make third-party iron ore pellet shipments. Fitch views
the transaction positively, as it expands Cliffs' customer base,
provides a captive source of demand for a portion of its iron ore
and creates the opportunity for synergies.
Liquidity/Debt Maturity Profile: Cliffs had cash and cash
equivalents of $56 million and $1.123 billion available under its
$2 billion ABL credit facility due 2025 as of Sept. 30, 2020.
Cliffs issued $1.075 billion in secured notes in 2Q20, of which
$736 million was used to reduce previously outstanding debt, while
$120 million was intended to be used to finance the construction of
its HBI production plant, resulting in $219 million of additional
liquidity. Cliffs has amended its ABL credit facility to increase
the facility to $3.5 billion from $2.0 billion following its
acquisition of AM USA assets.
Cliffs also announced plans to suspend future dividends due to the
pandemic's impact on operations, and it has the ability to defer
capex by approximately $200 million. Fitch views the marginal
increase in debt as offset by improved liquidity to weather a
period of weak demand. Fitch believes Cliffs will use excess cash
to reduce borrowings under its ABL credit facility as market
conditions improve, as evidenced by its $250 million reduction in
2Q20.
Vertically Integrated Business Model: Cliffs' merger with AK Steel
created a vertically integrated steel producer that is
self-sufficient in iron ore, which Fitch expects to improve steel
margins and provide the opportunity for synergies. Following its AM
USA acquisition, Cliffs has roughly 17 million tons of additional
steel capacity. The transaction creates the opportunity for further
synergies and additional operational flexibility.
HBI Strategy: EAF steel producers have been taking market share
from blast furnace producers in the U.S. As EAF steel producers
expand into higher value-added steel products, they will require a
higher quality, iron ore-based metallic, such as HBI, to produce
higher quality steel. Cliffs' strategy is to become a critical
supplier of HBI to EAFs, and it began construction on its Toledo
HBI plant as part of that strategy.
Cliffs spent approximately $1 billion to construct the HBI plant
and production of HBI began in December 2020. Cliffs expects annual
capacity to be approximately 1.9 million tonnes once the plant is
fully operational and to begin third-party shipments in 1Q21. HBI
can also be used internally by AK Steel's and ArcelorMittal USA's
blast furnaces to improve productivity.
Strong Operational Ties: Fitch has equalized the IDRs of Cliffs and
AK Steel given the vertical integration between the entities, which
results in strong operational and strategic ties. Fitch believes AK
Steel will continue to account for a meaningful portion of Cliffs'
iron ore production. Fitch views Cliffs' financial performance as
linked to AK Steel's, as the steel and manufacturing segment will
account for the majority of the combined company's sales.
Additionally, certain Cliffs notes benefit from guarantees from AK
Steel and some subsidiaries, providing legal ties between the
entities. Fitch believes additional borrowing will be at the Cliffs
level and expects the remaining AK Steel debt to be redeemed.
DERIVATION SUMMARY
Cliffs is comparable in size but less diversified compared with
integrated steel producer United States Steel Corporation
(B-/Negative) and smaller than globally diversified steel producer
ArcelorMittal S.A. (BB+/Negative). Cliffs is larger compared with
EAF long steel producer Commercial Metals Company (BB+/Stable) in
terms of steel capacity, although Cliffs has less favorable credit
metrics. Cliffs is also larger in terms of annual capacity,
although has less favorable credit metrics compared with EAF
producer Steel Dynamics, Inc. (BBB/Stable).
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Steel shipments decline significantly in 2020, recover in 2021
and approach approximately 16.5 million tons in 2023.
-- Capex of approximately $400 million in 2020, then roughly $500
million per year thereafter.
-- No dividends in 2020 after 1Q20, dividend reinstated in 2021.
-- No additional acquisitions or share repurchases through the
rating horizon.
Key Recovery Rating Assumptions
The recovery analysis assumes CLF would be reorganized as a going
concern (GC) in bankruptcy rather than liquidated. Fitch assumed a
10% administrative claim and assumed the ABL credit facility is 75%
drawn in the recovery analysis.
GC Approach
A hypothetical default scenario could be caused by a prolonged
recession or a period of prolonged low steel prices potentially
caused by a combination of weak demand and elevated imports. Fitch
assumed a bankruptcy scenario exit GC EBITDA of $1.25 billion. The
GC EBITDA estimate is reflective of a midcycle sustainable EBITDA
level upon which Fitch bases the enterprise valuation. The higher
GC EBITDA reflects CLF's acquisition of approximately 17 million
tons of steelmaking capacity. The $350 million of additional EBITDA
does not reflect $150 million of anticipated synergies.
Fitch generally applies EBITDA multiples that range from 4.0x to
6.0x for metals and mining issuers given the cyclical nature of
commodity prices. Fitch applied a 5.0x multiple to the GC EBITDA
estimate to calculate a post-reorganization enterprise value of
$4.05 billion after an assumed 10% administrative claim. The 5.0x
multiple compares with CLF's 5.6x acquisition multiple based off of
AK Steel's LTM-adjusted EBITDA as of Sept. 30, 2019.
The allocation of value in the liability waterfall results in a
Recovery Rating (RR) of 'RR1' for the first lien secured ABL credit
facility and the first lien secured notes, which results in a 'BB'
rating; an 'RR4' for the CLF senior unsecured guaranteed notes,
which results in a 'B' rating; and an 'RR6' for the CLF unsecured
notes not benefiting from guarantees; the AK Steel guaranteed
unsecured notes and the CLF convertible notes result in a 'CCC+'
rating. The unsecured convertible notes and unsecured 2040 notes do
not benefit from guarantees and are therefore subordinated in the
recovery waterfall.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Total debt to EBITDA sustained below 4.0x.
-- The expectation of sustained positive FCF.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total debt to EBITDA sustained above 5.0x.
-- Weaker than expected auto demand and/or a slower than
anticipated economic recovery
-- Resulting in sustained negative FCF.
-- Deteriorating liquidity position.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: As of Sept. 30, 2020, CLF had $56 million in
cash and cash equivalents, and $1.715 billion available under its
$2 billion ABL credit facility due 2025. In 4Q20, CLF amended its
ABL which resulted in an increase in size to $3.5 billion from $2.0
billion. The ABL credit facility matures in 2025, or 91 days prior
to the stated maturity date of any portion of existing debt if the
aggregate amount of existing debt that matures on the 91st day is
greater than $100 million. The ABL credit facility is subject to a
springing 1.0x minimum fixed-charge coverage covenant when
availability is less than the greater of (i) 10% of the lesser of
(a) the maximum ABL amount (currently $2 billion) and (b) the
borrowing base; and (ii) $100 million. CLF suspended its dividend
and has no material maturities until 2024, but it has pension
expense obligations.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMMUNITY HEALTH: Releases Early Tender Offer Results
-----------------------------------------------------
Community Health Systems, Inc. has released early tender results of
the previously announced cash tender offer by its wholly owned
subsidiary, CHS/Community Health Systems, Inc., to purchase for
cash any and all of the Issuer's outstanding Junior-Priority
Secured Notes due 2023, on the terms and subject to the conditions
set forth in the Issuer's Offer to Purchase Statement, dated Jan.
19, 2021, as amended.
According to Global Bondholder Services Corporation, the depositary
and information agent for the Tender Offer, as of 5:00 p.m., New
York City time, on Feb. 1, 2021, $132,925,000 aggregate principal
amount, or approximately 7.52%, of the outstanding 2023
Junior-Priority Secured Notes were validly tendered and not validly
withdrawn. All of the 2023 Junior-Priority Secured Notes validly
tendered and not validly withdrawn by the Early Tender Deadline
were accepted for purchase by the Issuer.
The settlement date for 2023 Junior-Priority Secured Notes accepted
for purchase as of the Early Tender Deadline was expected to occur
on Feb. 2, 2021. The Tender Offer is scheduled to expire at 11:59
p.m., New York City time, on Feb. 16, 2021, unless extended or
earlier terminated by the Issuer. The withdrawal deadline for the
Tender Offer was 5:00 p.m., New York City time, on February 1, 2021
and has not been extended. Accordingly, previously tendered 2023
Junior-Priority Secured Notes may not be withdrawn, subject to
applicable law.
The Tender Offer is subject to the satisfaction or waiver of
certain conditions as described in the Offer to Purchase. The
complete terms and conditions of the Tender Offer are set forth in
the Offer to Purchase and remain unchanged.
As previously disclosed, on Jan. 19, 2021, the Issuer delivered to
the trustee for delivery to the holders of 2023 Junior-Priority
Secured Notes a conditional notice of redemption to redeem on Feb.
4, 2021 all of the 2023 Junior-Priority Secured Notes then
outstanding at a redemption price equal to 107.406% of the
principal amount of the 2023 Junior-Priority Secured Notes plus
accrued and unpaid interest to, but not including, the Redemption
Date.
The Issuer has retained Credit Suisse Securities (USA) LLC to act
as dealer manager in connection with the Tender Offer. Questions
about the Tender Offer may be directed to Credit Suisse Securities
(USA) LLC at (800) 820-1653 (toll free) or (212) 538-2147
(collect).
Copies of the Tender Offer documents and other related documents
may be obtained from Global Bondholder Services Corporation, the
depositary and information agent for the Tender Offer, at (866)
470-3800 (toll free) or (212) 430-3774 (collect), or by email at
contact@gbsc-usa.com.
About Community Health Systems Inc.
Community Health Systems, Inc. -- http://www.chs.net-- is a
publicly traded hospital company and an operator of general acute
care hospitals in communities across the country. The Company,
through its subsidiaries, owns, leases or operates 99 affiliated
hospitals in 17 states with an aggregate of approximately 16,000
licensed beds. The Company's headquarters are located in Franklin,
Tennessee, a suburb south of Nashville.
Community Health reported a net loss attributable to the Company's
stockholders of $675 million for the year ended Dec. 31, 2019,
following a net loss attributable to the Company's stockholders of
$788 million for the year ended Dec. 31, 2018. As of Sept. 30,
2020, the Company had $16.51 billion in total assets, $17.99
billion in total liabilities, $481 million in redeemable
noncontrolling interests in equity of consolidated subsidiaries,
and a total stockholders' deficit of $1.95 billion.
* * *
As reported by the TCR on Dec. 29, 2020, S&P Global Ratings raised
its issuer credit rating on Community Health Systems Inc. to 'CCC+'
from 'SD' (selective default) and raised its rating on the
company's unsecured debt due 2028 to 'CCC-' from 'D'. S&P said the
company's recent financial transactions have improved its maturity
profile and lowered interest costs.
In November 2020, Fitch Ratings affirmed the Long-Term Issuer
Default Ratings (IDR) of Community Health Systems, Inc. (CHS) and
subsidiary CHS/Community Health Systems, Inc. at 'CCC'.
CRACKED EGG: Ordered to Follow Face Covering Ruling or Close
------------------------------------------------------------
Matthew Santoni of Law360 reports that a Pittsburgh-area restaurant
defying Pennsylvania's orders to require face masks and limit
occupancy during the coronavirus pandemic must start following the
rules or shut down, after a state court judge granted the Allegheny
County Health Department an injunction on Wednesday.
Allegheny County Court of Common Pleas Judge John McVay said the
orders -- mandating masks for restaurant staff and customers who
aren't eating -- passed constitutional muster against the
background of the COVID-19 pandemic. The potential harm to public
health that The Crack'd Egg would cause by remaining open without
masks or social distancing outweighed the harm the business might
face by following the state's orders, the judge said.
"The public health of others, by not preventing community spread,
will be harmed including the public health of all business owners,
employees and customers," Judge McVay wrote in his opinion
Wednesday, Feb. 3, 2021. "If I did not grant the injunction,
restaurants that are following the rules will become less likely to
do so and thus further increasing public health risks to everyone
involved and possibly increasing overall community spread."
The court granted an emergency injunction bid by the health
department, which required The Crack'd Egg and its parent company,
The Cracked Egg LLC, to shut down until the restaurant submits
plans to follow the pandemic mitigation orders.
As Pennsylvania Gov. Tom Wolf and Health Secretary Rachel Levine
issued orders in the summer mandating the public wearing of face
masks and limiting indoor restaurant occupancy to 25% or 50%, The
Crack'd Egg had reopened at full capacity without requiring anyone
to wear masks, the opinion noted. Several health department
inspections had warned owner Kimberly Waigand that she should
follow the orders, but she continued to defy them and stayed open
even as the county suspended the restaurant's operating permit,
advertising her actions as a stand for "freedom."
Allegheny County filed a lawsuit against the restaurant in
September 2020, and the restaurant hit back with a federal
countersuit calling the mask orders unconstitutional. The Cracked
Egg LLC filed for Chapter 11 bankruptcy in October 2020 so it could
halt the litigation and stay open while reorganizing, but the
bankruptcy court lifted the stay on the county's case on Jan. 7,
2021 and the restaurant asked to withdraw its bankruptcy filings on
Monday.
In briefs and at a three-day evidentiary hearing last week of
January 2021, attorneys for The Crack'd Egg argued that the mask
order was unconstitutional, pointing to a federal judge's September
order in County of Butler v. Wolf that would have lifted some
pandemic restrictions, like limits on crowd sizes, had it not been
appealed to the Third Circuit.
Judge McVay noted, however, that the County of Butler decision
didn't address masks, and he disagreed with other parts of the
federal court ruling that said Jacobson v. Massachusetts, a 1905
decision on government authority during a pandemic, no longer
applied.
"When read in context and in its entirety, Jacobson can
substantially be reconciled with current constitutional law and be
viewed as a forerunner of our present rational basis test," he
wrote. "The existence of a pandemic should be considered as a
factor when applying the rational basis test and does not in any
way mean that our current constitutional analysis needs to be
suspended or lowered. The emergency declarations and subsequent
COVID-19 mitigation orders of Governor Wolf and Dr. Levine were all
taken with the undoubted intent to protect public health during a
pandemic, and thus were rationally related to a legitimate
government interest."
While The Crack'd Egg had also argued that the mask mandate hadn't
followed a typical state process for proposing, vetting and
approving regulations, Judge McVay said the Supreme Court of
Pennsylvania's April 2020 ruling on another coronavirus-related
case, Friends of Danny DeVito v. Wolf , had said the governor's
emergency powers included suspending the normal rulemaking
process.
"To require the commonwealth or the ACHD to follow time-consuming
rule-making procedures would result in greater harm to the general
public," he wrote. Likewise, the Allegheny County Health
Department had independent authority to issue orders to abate
public health hazards and the spread of diseases, including
COVID-19.
Turning to the injunction, the judge said he believed that COVID-19
was a serious threat, and he said he gave little weight to the
restaurant's experts who sought to downplay the effectiveness of
masks or the number of true positive tests.
"Analyzing the evidence in the context of the rational basis test
does not require proof beyond a reasonable doubt. Further, I do not
find that evidence of 100% mask efficacy or that outbreaks have
occurred at the Cracked Egg are requisites to prove immediate or
irreparable harm to preventative public health," he wrote.
The judge said he believed Waigand when she said that her revenues
had cratered during the initial shutdown orders that limited
restaurants to takeout only, and he also believed her when she
testified that she would never require masks. He asked her in his
opinion to reconsider working with the health department on a plan
that would let her reopen.
"We do intend to appeal," said Sy Lampl of Robert O. Lampl Law
Office, one of the attorneys representing the restaurant. "While
we have great respect for Judge McVay both as a person and jurist,
we obviously disagree with his ruling and are disappointed in the
outcome."
Dr. Debra Bogen, director of the county health department, said the
judge's ruling was a welcome one.
"Today's ruling validates the Health Department's actions to
protect the public during this pandemic," she said "I thank
everyone on our legal and food safety teams who worked tirelessly
on this case."
The Allegheny County Health Department is represented in-house by
Vijyalakshmi Patel, Michael Parker and Jeffrey Bailey.
The Cracked Egg LLC is represented by James R. Cooney, Robert O.
Lampl, Sy O. Lampl, Alexander L. Holmquist and Ryan J. Cooney of
Robert O. Lampl Law Office, and Dennis M. Blackwell of The
Blackwell Law Firm.
The case is County of Allegheny v. The Cracked Egg LLC, case number
GD-20-009809, in the Court of Common Pleas of Allegheny County,
Pennsylvania.
About The Cracked Egg
The Cracked Egg LLC is a family-owned culinary-driven gourmet
eatery in Brentwood, Pennsylvania that serves breakfast and lunch.
Cracked Egg filed a Chapter 11 bankruptcy petition (Bankr. W.D. Pa.
Case No. 20-22889) on Oct. 9, 2020. In the petition signed by
Kimberly Waigand, the owner, the Debtor was estimated to have less
than $50,000 in assets and $100,000 to $500,000 in liabilities.
Robert O Lampl Law Office and BeanCounters Tax and Accounting
Services serve as the Debtor's legal counsel and accountant,
respectively.
CRED INC: Court Denies Motion to Dismiss Subsidiary's Case
----------------------------------------------------------
Law360 reports that a Delaware bankruptcy judge denied a motion on
Wednesday, Feb. 3, 2021, seeking to dismiss the Chapter 11 case of
a wholly-owned subsidiary of cryptocurrency investment firm Cred
Inc., saying the former director who sought the dismissal didn't
have the authority to have the case tossed.
U.S. Bankruptcy Judge John T. Dorsey denied the motion to dismiss
subsidiary Cred Capital Inc.'s Chapter 11 case, finding that former
director James Alexander's motion wasn't supported by the facts
surrounding the incorporation of the company upon which he relied.
Mr. Alexander argued in his motion that he was the only person who
could authorize Cred Capital's bankruptcy.
About Cred Inc.
Cred Inc. is a cryptocurrency platform that accepts loans of
cryptocurrency from non-U.S. persons and pays interest on those
loans. Cred -- https://mycred.io -- is a global financial services
platform serving customers in over 100 countries. Cred is a
licensed lender and allows some borrowers to earn a yield on
cryptocurrency pledged as collateral.
Cred Inc. and its affiliates sought Chapter 11 protection (Bankr.
D. Del. Lead Case No. 20-12836) on Nov. 7, 2020. Cred was
estimated to have assets of $50 million to $100 million and
liabilities of $100 million to $500 million as of the bankruptcy
filing.
The Debtors tapped Paul Hastings LLP as their bankruptcy counsel,
Cousins Law LLC as local counsel, and MACCO Restructuring Group,
LLC, as financial advisor. Donlin, Recano & Company, Inc., is the
claims agent.
The U.S. Trustee for Region 3 appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on Dec. 3,
2020.
CROWDSTRIKE HOLDINGS: Moody's Completes Review, Retains Ba2 Rating
------------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Crowdstrike Holdings, Inc. and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
CrowdStrike's Ba2 rating reflects our expectations for rapid
strengthening of credit profile driven by strong revenue growth,
increasing profitability and a growing base of recurring
subscription revenues. CrowdStrike's credit profile benefits from
its strong cloud-based security offerings and a growing portfolio
of products with large addressable IT security markets. Moody's
expects the company to maintain robust liquidity and does not
expect the company to initiate dividends or share repurchases over
the next several years. Crowdstrike operates in a rapidly evolving
industry and faces strong competition. Initial leverage after the
notes issuance in January 2021 is high, but Moody's expects rapid
deleveraging over the next 12 to 24 months.
The principal methodology used for this review was Software
Industry published in August 2018.
DAVID CORN: Bud Palmer to Auction Merchandise on Feb. 17
--------------------------------------------------------
In connection with the Chapter 7 case of David Corn Jr. (Bankr. D.
Kan. Case No. 19-11668), Bud Palmer Auction announced that it will
hold an auction at 10:00 a.m. on Feb. 17, 2021, at 101 West 29th
Street North, Wichita, Kansas, for the sale of World Wrestling
Entertainment and Ultimate Fighting Championship merchandise.
Online bidding for the WWE & UFC merchandise closes at 9:00 a.m. on
Feb. 17, 2021. A bid for the assets starts at $19,750. Interested
bidders must have an online account. Link to the bid online:
tinyurl.com/fq2fh9e4.
All items will be sold in one lot: 91+ Pallets of (WWE & UFC -
Action Figures, Knick Knacks, Jewelry Dog Tags Belts, Wrestlers
Bobble Heads) - Over 15,000 Pieces. Merchandise will fill up 2
semi-trucks.
Inventory can be accessed at tinyurl.com/yqegs4mw
Bud Palmer can be reached at:
Bud Palmer Auction
101 West 29th St.
North Wichita, KS 67204
Tel: (316) 838-4141
Email: David@budpalmerauction.com
DENTALCORP HEALTH: Moody's Affirms B3 CFR, Outlook Negative
-----------------------------------------------------------
Moody's Investors Service affirmed Dentalcorp Health Services ULC's
B3 corporate family rating, B3-PD probability of default rating, B2
senior secured rating on its first lien facilities and Caa2 senior
secured rating on its second lien facilities. The outlook remains
negative.
The ratings affirmation follows incremental proceeds of $75 million
and $25 million raised under its senior secured first and second
lien term loan facilities, respectively. Net proceeds will be used
to fund acquisitions over the next 12 to 18 months.
Despite a rapid recovery in patient visits and same-store revenues
to near pre-pandemic levels following mandated closures in Q2 2020,
the outlook remains negative given elevated leverage declining to
slightly below 8x by YE 2021 (from around 13x pro-forma at YE 2020,
with no adjustment for the impact of COVID-19) and Moody's forecast
for modest free cash flow consumption before acquisitions during
2021.
Affirmations:
Issuer: Dentalcorp Health Services ULC
Corporate Family Rating, Affirmed B3
Probability of Default Rating, Affirmed B3-PD
Senior Secured First Lien Term Loan, Affirmed B2 (LGD3)
Senior Secured First Lien Revolving Credit Facility, Affirmed B2
(LGD3)
Senior Secured First Lien Delayed Draw Term Loan, Affirmed B2
(LGD3)
Senior Secured Second Lien Term Loan, Affirmed Caa2 (LGD5)
Senior Secured Second Lien Delayed Draw Term Loan, Affirmed Caa2
(LGD5)
Outlook Actions:
Issuer: Dentalcorp Health Services ULC
Outlook, Remains Negative
RATINGS RATIONALE
Dentalcorp's B3 CFR is constrained by: (1) elevated leverage; (2)
weak interest coverage and cash flow relative to debt
(EBITA/Interest around 1.2x and RCF/net debt around 5% estimated
for year end 2021); and (3) risks inherent to its aggressive
acquisition strategy and private equity ownership. The company
benefits from: (1) its position as a leading dental support
organization in Canada, which is in the early stage of market
consolidation; (2) a domestic dental industry characterized by a
cash-based pay model and stable pricing dynamics; (3) an
established track recorded integrating over 400 acquired dental
practices as of year end 2020; and (4) good liquidity.
Dentalcorp will maintain good liquidity during 2021. As of year-end
2020, Moody's estimates that sources total close to C$180 million,
consisting of cash on hand of about C$140 million pro-forma for the
incremental financing and acquisitions under signed letters of
intent, and full availability under the C$43 million ($33 million
USD equiv.) revolver due 2023. Additional sources of liquidity
include an equity injection from shareholders for around C$
90 million. Uses over the next twelve months total about C$20
million, consisting of Moody's forecast of C$10 million in negative
free cash flow before acquisitions and debt amortizations totaling
close to C$12 million. Moody's expects acquisitions to consume
around an additional C$100 million in excess cash during 2021. The
revolver is subject to a springing first lien net leverage covenant
when at least 35% drawn. Moody's does not expect dentalcorp to draw
on the facility. Alternate liquidity sources are limited as the
company's assets are encumbered.
Dentalcorp's first lien facilities are rated B2, one notch above
the B3 CFR, reflecting higher recovery in the capital structure,
while the second lien facilities are rated two notches below the
CFR, at Caa2, reflecting their junior position behind the first
lien debt.
The negative outlook reflects Moody's forecast for weak financial
metrics and free cash flow during 2021 combined with sustained
rapid, debt-funded growth.
Key social considerations include risks associated with the
pandemic on the health and safety of employees and patients. The
company has enhanced protocols and personal protective equipment to
limit the risk of infection at its practices. Given the dental
industry's overall good track record of not propagating the spread
of COVID-19, Moody's believes the likelihood of repeat mandated
closures of dental offices are limited. However, until a vaccine is
more widely distributed, the risk of temporary closures or reduced
patient volumes remains if the infection rate of the virus
increases further.
Governance risks associated with dentalcorp are high given private
equity ownership and a lack of formal financial policies combined
with an aggressive growth strategy. In the near term, equity
contributions from shareholders moderate risks associated with
rapid, debt funded growth. Shareholders injected equity totaling
$75 million in early 2020 and plan to contribute an additional $70
million, establishing a track record of strong shareholder support.
The current ratings reflect that longer term, we believe management
will limit the pace of acquisitions as required to facilitate
deleveraging and ensure a tenable capital structure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company continues to
demonstrate a successful track record of integrating acquisitions,
adjusted debt to EBITDA is sustained below 6x (13x estimated at LTM
YE 2020) and sustained positive free cash flow before
acquisitions.
The ratings could be downgraded if liquidity weakens, adjusted
EBITA to interest remains below 1.0x (0.5x estimated at LTM YE
2020), or if the company generates negative free cash flow before
acquisitions.
Dentalcorp is a Toronto-based dental support organization which
owns over 400 practices in Canada as of January 2021. Moody's
estimate dentalcorp's pro-forma annualized revenue was over C$1
billion for the twelve months ended December 2020.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
DIVERSIFIED HEALTHCARE: Moody's Cuts CFR to Ba3, Outlook Negative
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Diversified
Healthcare Trust (DHC) including its corporate family rating to Ba3
from Ba2, its guaranteed senior unsecured notes to Ba3 from Ba1,
and its senior unsecured notes to B1 from Ba2. The guaranteed
senior unsecured shelf downgraded to (P)Ba3 from (P)Ba1 and senior
unsecured shelf downgraded to (P)B1 from (P)Ba2. The speculative
grade liquidity rating remains unchanged at SGL-3. The rating
outlook remains negative.
The ratings downgrades reflect the shift in DHC's capital
structure, with the REIT amending its bank credit agreement to
include the delivery of first lien mortgages on unencumbered assets
totaling about $1.4 billion in gross book value in order to secure
obligations under the $1 billion facility in exchange for waivers
on most financial covenants through 2Q22. The downgrades also
reflect the ongoing impact of the coronavirus on the REIT's senior
housing cash flows and leverage metrics. Moody's regard the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
Moody's also note that the recent bank amendment raises concerns
about financial policy and governance.
Downgrades:
Issuer: Diversified Healthcare Trust
Corporate Family Rating, Downgraded to Ba3 from Ba2
Gtd Senior Unsecured Shelf, Downgraded to (P)Ba3 from (P)Ba1
Gtd Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3
from Ba1
Senior Unsecured Shelf, Downgraded to (P)B1 from (P)Ba2
Senior Unsecured Regular Bond/Debenture, Downgraded to B1 from
Ba2
Outlook Actions:
Issuer: Diversified Healthcare Trust
Outlook, Remains Negative
RATINGS RATIONALE
DHC's Ba3 CFR reflects its diversification among multiple segments
of healthcare real estate, including senior housing, medical office
buildings, life sciences, and, to a much lesser extent, wellness
centers and skilled nursing facilities. Despite the contribution of
mortgage liens to its bank facility, the REIT still maintains a
large unencumbered asset pool that could be monetized once the
operating environment stabilizes and transaction pricing improves.
DHC also benefits from its large size and geographic and tenant
diversification.
DHC's ratings are constrained by its high leverage and the
increased business risk it assumed by transitioning Five Star's
senior living portfolio to a management structure from a lease
effective at the start of 2020. This portfolio had been
experiencing declining NOI prior to COVID due to industry wide
challenges as well as operator-specific missteps by Five Star under
the previous leadership team. Moody's expect DHC to face execution
risk with its plans to turn around performance, with the risks now
magnified by the coronavirus outbreak which is causing steep
occupancy declines and expense increases across the industry.
Declining cash flow has caused DHC's Net Debt/EBITDA to rise to
10.9x for 3Q20 and occupancy has since fallen another 3.7% over the
fourth quarter. Even as vaccinations will help stabilize cash
flows, Moody's expect the REIT will face a long and protracted road
to recovery and leverage will remain high over the intermediate
term.
DHC's ratings also consider governance risks associated with its
financial policy and external management structure, which Moody's
believes creates potential conflicts of interest between management
and investors. DHC is managed by The RMR Group, which also manages
several other REITs and operating companies, including Five Star,
which is a material concern with respect to DHC's governance.
DHC's SGL-3 rating reflects its reduced financial flexibility
following the amendment of its bank facility as it continues to
face high operating risks. The REIT has access to an $800 million
secured revolver, with upcoming maturities including $300 million
unsecured bonds in December 2021 and $200 million of term loans
that must be refinanced prior to DHC exercising the extension
option on its revolver that comes due in January 2022.
The rapid spread of the coronavirus outbreak, deteriorating global
economic outlook, and high asset price volatility have created an
unprecedented credit shock across a range of sectors and regions.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action reflects the impact on Diversified
Healthcare Trust of the deterioration in credit quality it has
triggered, given its exposure to senior housing operations, which
has left it vulnerable to shifts in market demand and sentiment in
these unprecedented operating conditions.
DHC's negative outlook reflects the steep cash flow declines it has
experienced within its senior housing business, which has resulted
in very high Net Debt/EBITDA. Moody's expect a long and protracted
recovery in senior housing will make it challenging for DHC to
reduce debt levels.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
DHC's ratings could be downgraded should the REIT fail to maintain
ample liquidity as it approaches upcoming debt maturities. A
downgrade would also reflect Net Debt/EBITDA above 8x and fixed
charge coverage below 2.2x on a sustained basis.
An upgrade is unlikely near-term but would likely reflect strong
liquidity, Net Debt/EBITDA below 7x, and sustained positive NOI
growth from key business segments.
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in September 2018.
E.B.J.T. ENTERPRISE: Seeks to Hire Abbasi Law as Counsel
--------------------------------------------------------
E.B.J.T. Enterprise, LLC, seeks approval from the U.S. Bankruptcy
Court for the Central District of California to employ Abbasi Law
Corporation, as its counsel.
The firm will render these services:
a. represent the Debtor at its initial Debtor interview;
b. represent the Debtor in its meeting of creditors pursuant
to the Bankruptcy Code, or any continuance thereof;
c. represent the Debtor at all hearings before the U.S.
Bankruptcy Court involving the Debtor as Debtor-in-Possession and
as recognized by the Debtor;
d. prepare on behalf of the Debtor, as Debtor-in-Possession
all necessary applications, motions, orders, and other legal
papers;
e. advise the Debtor, regarding matters of bankruptcy law,
including the Debtor's rights and remedies with respect to the
Debtor's assets and claims of its creditors;
f. represent the Debtor with regard to all contested matters;
g. represent the Debtor with regard to the preparation of a
disclosure statement and the negotiation, preparation, and
implementation of a plan of reorganization;
h. analyze any secured, priority, or general unsecured claims
that have been filed in the Debtor's bankruptcy case;
i. negotiate with the Debtor's secured and unsecured creditors
regarding the amount and payment of their claims;
j. object to claims as may be appropriate;
k. perform all other legal services for the Debtor as
Debtor-in-Possession as may be necessary, other than adversary
proceedings which would require a further written agreement;
l. advise the Debtor with respect to its powers and duties as
a Debtor-in-Possession in the continued operation of its business;
m. provide counseling with respect to the general corporate,
securities, real estate, litigation, environmental, state
regulatory, and other legal matters which may arise during the
pendency of the Chapter 11 case; and
n. perform all other legal services that is desirable and
necessary for the efficient and economic administration of the
Chapter 11 case.
The firm will be paid at these hourly rates:
Attorneys $400
Paralegals $60
Law Clerks $25
Prior to the commencement of the Chapter 11 case, the firm received
from the Debtor a retainer in the amount of $7,500, and $1,717
filing fee.
Abbasi Law will also be reimbursed for reasonable out-of-pocket
expenses incurred.
Matthew Abbasi, a partner of Abbasi Law Corporation, assured the
Court that the firm is a "disinterested person" as the term is
defined in Section 101(14) of the Bankruptcy Code and does not
represent any interest adverse to the Debtor and its estates.
Abbasi Law can be reached at:
Matthew Abbasi, Esq.
ABBASI LAW CORPORATION
6320 Canoga Ave., Suite 220
Woodland Hills, CA 91367
Tel: (310) 358-9341
Fax: (888) 709-5448
About E.B.J.T. Enterprise
E.B.J.T. Enterprises, LLC is the owner of fee simple title to
certain property located at 1235 2nd St, Hermosa Beach, CA valued
at $3 million.
E.B.J.T. Enterprises, LLC, based in Pacoima, CA, filed a Chapter 11
petition (Bankr. C.D. Cal. Case No. 20-11776) on Oct. 2, 2020. In
the petition signed by Tracie Carolyn Love, managing member, the
Debtor disclosed $3,000,000 in assets and $2,601,761 in
liabilities. The Hon. Martin R. Barash presides over the case.
ABBASI LAW CORPORATION, serves as bankruptcy counsel.
EASTERDAY RANCHES: Court Lets Tyson Fresh Feed 54,000 Cows
----------------------------------------------------------
Jeremy Hill of Bloomberg News reports that a U.S. bankruptcy judge
protected a much-needed cash infusion for Easterday Ranches Inc.,
helping ensure that its 54,000 cattle will continue to eat.
The cattle farm in Washington state filed for Chapter 11 bankruptcy
on Feb. 1, 2021, after its only customer, Tyson Fresh Meats Inc.,
sued for more than $200 million, claiming it was being billed for
the upkeep of bovines that don't exist, court papers show. Tyson
slashed payments to the ranch, and Easterday quickly ran low on
cash, threatening its ability to feed the animals.
The business projects it will run out of cattle feed on Thursday,
Feb. 4, 2021, according to court papers. But Tyson has agreed to
wire $1.75 million to the ranch so it can replenish its feed, Maxim
Litvak of Pachulski Stang Ziehl & Jones said in an emergency
bankruptcy hearing Wednesday. U.S. Bankruptcy Judge Whitman Holt
subsequently approved a motion barring creditors from laying claim
to the money.
Without the order, Easterday would have been "forced to terminate
operations, which would have the drastic effect of putting
approximately 54,000 cattle at risk of death," Co-Chief
Restructuring Officer T. Scott Avila said in a court declaration.
"It would obviously be an environmental disaster to not be able to
feed that cattle and allow that cattle to wither away and die,"
Litvak said in the hearing Wednesday, February 3, 2021. "That is
obviously not something the debtor would ever allow to happen."
"We're following the proper procedures through bankruptcy court to
ensure that all cattle that remain at Easterday feedlots are
properly cared for," a representative for Tyson said in an emailed
statement before the hearing. "Tyson Foods is not taking action
that subjects these cattle to risk. To the contrary, Tyson is
keenly focused on the health and well-being of the cattle that
remain at Easterday Ranches."
Invoice Fraud
The problem, Tyson alleges, is that many of the cattle it was
paying to feed didn't exist. Fraudulent invoices led Tyson to
overpay for the purchase and feeding of cattle by more than $200
million, the meat giant alleges in a lawsuit filed last month.
A former top official of Easterday Ranches "freely admitted" to
creating phony invoices in conversations with Tyson, Richard
Pachulski of Pachulski Stang Ziehl & Jones said in the hearing.
Members of the family that managed the businesses have since
relinquished control of the farm, he said.
Tyson cut payments to Easterday, but still paid the ranch's vendors
directly prior to the bankruptcy, according to court papers. Tyson
also asked for a court-appointed receiver to take over the ranch,
which then filed for bankruptcy.
The farming segment of the business will also file for bankruptcy,
likely within the second week of February 2021, Pachulski said.
About Easterday Ranches Inc.
Easterday Ranches, Inc., is a privately-held company in the cattle
ranching and farming business.
According to PacerMonitor.com, Easterday Ranches, Inc., doing
business as Easterday Farms, filed a Chapter 11 bankruptcy petition
(Bankr. E.D. Wash. Case No. 21-00141) on Feb. 1, 2021. T. Scott
Avila and Peter Richter of Paladin Management Group, currently
serving as co-CROs, signed the petition.
The Debtor estimated at least $100 million in assets and
liabilities in its bankruptcy filing.
Pachulski Stang Ziehl & Jones LLP is the Company's bankruptcy
counsel. Bush Kornfeld LLP is the Debtor's general and litigation
counsel. Davis Wright Tremaine LLP is the special counsel.
EVERGLADES ADVENTURE: Seeks to Hire Dal Lago Law as Legal Counsel
-----------------------------------------------------------------
Everglades Adventure Center, LLC seeks authority from the U.S.
Bankruptcy Court for the Middle District of Florida to hire the law
firm Dal Lago Law as its counsel.
The firm's services will include:
a. providing the Debtor with legal advice and counsel;
b. preparing all necessary pleadings, motions, applications,
reports, and other legal papers as may be necessary in furtherance
of the Debtor's interests and objectives in the Case;
c. prosecuting and defending any causes of action on behalf of
the Debtor where special counsel is deemed unnecessary;
d. assisting in the formulation of a plan of reorganization or
liquidation and advise the Debtor with regard to same;
e. assisting the Debtor in considering and requesting the
appointment of a trustee or examiner, should such action become
necessary;
f. consulting with the Office of the United States Trustee
concerning the administration of the Debtor's estate;
g. representing the Debtor at hearings and other judicial
proceedings; and
h. performing such other legal services as may be required,
and as are deemed to be in the best interest of the Debtor, in
accordance with the powers and duties afforded to the Debtor under
the Bankruptcy Code.
The firm requested a retainer in the amount of $125,000.
The firm will be paid at these rates:
Michael R. Dal Lago $395 per hour
Christian G. Haman $325 per hour
Paralegal professional(s) $180 per hour
Michael R. Dal Lago, Esq., principal of Dal Lago, assured the court
that the firm does not hold or represent any interest adverse to
the Debtor or its estate, and is a "disinterested person" within
the meaning of 11 U.S.C 101(14).
About Everglades Adventure Center
Everglades Adventure Center, LLC filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. M.D. Fla.
20-06815) on Sept. 9, 2020, listing under $1 million in both assets
and liabilities. Judge Caryl E. Delano oversees the case.
Christopher L. Hixson, Esq. at Consumer Law Attorneys, represents
the Debtor as counsel.
FENDER MUSICAL: Moody's Completes Review, Retains B1 Rating
-----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Fender Musical Instruments Corporation and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review discussion held on January 20,
2021 in which Moody's reassessed the appropriateness of the ratings
in the context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Fender's credit profile (B1) reflects the company's strong brand
awareness. The Fender name is supported by the long-standing
reputation and quality of its guitars and product innovation. This
provides strong brand name recognition and significant barriers to
entry for guitars, its flagship product. Fender is also one of the
largest musical instrument companies in the world. Approximately
half of the company's sales are generated outside of North America,
with about a third coming from Europe and remainder of approximate
15% coming from Asia. Fender's financial policy reflects use of
moderate financial leverage. In addition to the substantial
uncertainty caused by the coronavirus pandemic, key credit risks
include the nonessential, highly discretionary nature of consumer
spending on musical instruments, Fender's relatively narrow product
focus, and significant customer concentration. Guitar Center, Inc.
(B3) alone represents about 16% of Fender's revenues. Guitar Center
is the largest private retailer of music products in the United
States. As a result, a disruption of sales to Guitar Center will
negatively impact Fender's performance.
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
FERRELLGAS PARTNERS: Appointment of Equity Committee Sought
-----------------------------------------------------------
Rio Grande Valley Gas Inc. asked the U.S. Bankruptcy Court for the
District of Delaware to appoint an official committee to represent
equity shareholders in the Chapter 11 case of Ferrellgas Partners
LP.
In a letter to the court, Rio Grande President Andre Maldonado
expressed dismay over Ferrellgas CEO James Ferrell's alleged
attempt to use the company's Chapter 11 bankruptcy process "to
massively dilute common unitholders."
Mr. Ferrell also criticized the CEO for paying himself a $3.5
million cash bonus as part of the company's bankruptcy.
"In light of these unfaithful action by company insiders, all
unitholders must have a seat at the table to determine the future
of Ferrellgas," Mr. Ferrell wrote in the letter.
Rio Grande is a holder of 33,425 of the common units issued by
Ferrellgas.
Two other investors, Kevin Barnes and Gwen Sirochman, also
requested for an official equity committee.
In a letter to the court, Ms. Sirochman said an equity committee
must be immediately formed given that Ferrellgas is a solvent
company with significant unitholder value.
About Ferrellgas Partners
Ferrellgas Partners LP and Ferrellgas Partners Finance Corp. filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code (Bankr. D. Del. Case Nos. 21-10021 and 21-10020) on Jan. 11,
2021. James E. Ferrell, chief executive officer and president,
signed the petitions.
Ferrellgas Partners, LP is a publicly traded Delaware limited
partnership formed in 1994 that has two direct subsidiaries,
Ferrellgas Partners Finance Corp. and non-debtor Ferrellgas, LP.
Ferrellgas Partners Finance is a Delaware corporation formed in
1996 and has nominal assets, no employees and does not conduct any
operations, but solely serves as co-issuer and co-obligor for the
2020 Notes. Ferrellgas, primarily through non-debtor OpCo, is a
distributor of propane and related equipment and supplies to
customers in the United States. Ferrellgas' market areas for
residential and agricultural customers are generally rural while
the market areas for industrial and commercial and portable tank
exchange customers are generally urban.
At the time of the filing, Ferrellgas Partners, LP was estimated to
have $100 million to $500 million in both assets and liabilities
while Ferrellgas Partners Finance was estimated to have less than
$50,000 in assets and $100 million to $500 million in liabilities.
Judge Mary F. Walrath oversees the cases.
The Debtors tapped Squire Patton Boggs (US) LLP as primary
bankruptcy and restructuring counsel, Chipman, Brown, Cicero &
Cole, LLP as local bankruptcy counsel, Moelis & Company LLC as
investment banker, and Ryniker Consultants as financial advisor.
Prime Clerk LLC is the claims, noticing & solicitation agent.
FETCH ACQUISITION: Moody's Completes Review, Retains B3 CFR
-----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Fetch Acquisition LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 22, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Fetch's B3 Corporate Family Rating reflects the company's
aggressive financial policy and high operational risk in a highly
discretionary product category. Fetch's products are highly
discretionary in nature and would normally be negatively impacted
by weakness in the U.S. economy. However, during the
coronavirus-induced recession, there has been an increase in pet
ownership due to more consumers staying at home and this has
resulted in higher demand than otherwise would not be experienced
by Fetch in a recession. Fetch also has some operational risk as
its products are largely reliant on two manufacturing facilities.
The rating also reflects Fetch's solid market position within the
durable pet products market and its domestic manufacturing and
vertical integration, which gives it a cost advantage relative to
its competitors. Growing incidence of pet ownership over the next
3-5 years will translate to growing demand for pet products
following the coronavirus related economic weakness.
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
FLEXERA SOFTWARE: Moody's Completes Review, Retains B2 CFR
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Flexera Software LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Flexera Software LLC's B2 corporate family rating reflects the
company's limited scale, narrow product offering in the software
asset management market, and aggressive financial policy as
evidenced by the company's debt financed acquisition strategy. The
company's strategy limits financial flexibility, and creates
integration and operational risks. Flexera benefits from its large
portion of recurring revenue, strong margin profile and low capital
expenditure, which allow it to generate consistent free cash flow.
The company's history of successfully integrating acquisitions and
deleveraging following transactions also provides support to the
rating. Moody's expects that Flexera will experience near term
margin pressure, since the company will need to increase staffing
in 2021 to support the recovering end market demand following
Flexera's deep operating expense reductions in 2020. Although
organic growth should drive operating leverage, increasing EBITDA,
Moody's expects that the increase in debt for Thoma Bravo's pending
acquisition of a majority ownership stake in Flexera will leave
adjusted debt to EBITDA above 7.5x (Moody's adjusted) for the next
two years. Still, Moody's expects that Flexera will benefit from
continued healthy FCF generation, with FCF to debt (Moody's
adjusted) maintained in the mid single digits over the next 12 to
18 months.
The principal methodology used for this review was Software
Industry published in August 2018.
FORESTAR GROUP: Moody's Hikes CFR to B1 on Continued Improvement
----------------------------------------------------------------
Moody's Investors Service upgraded Forestar Group Inc.'s Corporate
Family Rating to B1 from B2, Probability of Default Rating to B1-PD
from B2-PD and senior unsecured rating to B1 from B2. Moody's also
upgraded the company's Speculative Grade Liquidity Rating to SGL-2
from SGL-3. The outlook was changed to positive from stable.
The upgrade reflects Moody's expectation for continued improvement
in Forestar's credit profile, higher predictability in revenue and
profitability and on-going solid execution. The B1 rating on the
company's senior unsecured notes is on par with Forestar's CFR
reflecting its position as the preponderance of debt in Forestar's
capital structure. At fiscal year-end (September 30) 2021, Moody's
projects total debt-to-capitalization will be approximately 40%.
"Forestar's management team has successfully executed the company's
manufacturing-like business model and materially improved revenue
and profitability while remaining financially disciplined balancing
the interests of the company's creditors with the interest of its
shareholders." said Emile El Nems, a Moody's VP-Senior Analyst.
The positive outlook reflects Moody's expectation that the company
will maintain a disciplined financial policy and modest leverage
while aggressively pursuing revenue growth and profitability. In
addition, the positive outlook takes into consideration Moody's
expectations for solid underlying homebuilding industry
fundamentals.
The upgrade of the Forestar's Speculative Grade Liquidity Rating to
SGL-2 from SGL-3 reflects Moody's expectation of a good liquidity
profile over the next 12 to 18 months. At December 31, 2020,
Forestar had approximately $237 million in available cash and
approximately $340 million in availability under its revolving
credit facility that expires in October 2022.
The following rating actions were taken:
Upgrades:
Issuer: Forestar Group Inc.
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Senior Unsecured Notes, Upgraded to B1 (LGD4) from B2 (LGD4)
Outlook Actions:
Issuer: Forestar Group Inc.
Outlook, Outlook changed to Positive from Stable
RATINGS RATIONALE
Forestar's B1 CFR reflects the company's market position as a
leading US land developer across 21 states and 51 markets,
differentiated business model, solid execution, good liquidity
profile and strategic relationship with D.R. Horton, Inc., (DHI) a
premiere homebuilder in the US (Baa2 stable). At the same time,
Moody's rating takes into consideration the risk associated with
being a land developer such as potential impairment charges,
industry cyclicality, the competitive nature of the business it
operates in, and the absence of any guarantees by DHI for
Forestar's debt.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if (all ratios include Moody's
standard adjustments):
EBIT-to-interest expense is approaching 4.0x
Debt-to-Capitalization is below 40% for a sustained period of
time
The company improves its liquidity profile and free cash flow
The rating could be downgraded if:
Debt-to-Capitalization is above 45% for a sustained period of
time
Interest coverage is below 3.0x for a sustained period of time
The company's liquidity profile deteriorates
The homebuilding outlook becomes increasingly tenuous
The principal methodology used in these ratings was Homebuilding
And Property Development Industry published in January 2018.
Headquartered in Arlington, Texas, Forestar Group Inc. is a
publicly traded land developer that is currently operating in 51
markets in 21 states. On October 5, 2017, it became 75%-owned by
D.R. Horton, Inc., one of the country's largest homebuilder by unit
volume. Forestar's revenues for the FY 2020, ended September 30,
2020 were $932 million. As of December 31, 2020, DHI owns 65% of
Forestar's outstanding common stock.
FRONTERA HOLDINGS: Case Summary & 30 Largest Unsecured Creditors
----------------------------------------------------------------
Lead Debtor: Frontera Holdings LLC
500 Alexander Park
Suite 300
Princeton, New Jersey 08540
Business Description: Frontera Holdings LLC, together with its
Debtor and non-Debtor subsidiaries,
operates a natural gas fueled power
generation facility and sells energy through
the Mexican wholesale energy market and
capacity through long-term supply contracts.
Located approximately 1.8 miles from the
U.S.-Mexico border in Mission, Texas,
Frontera is the only U.S.-based power plant
to sell all of its power to Mexico.
Chapter 11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Southern District of Texas
Six affiliates that concurrently filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
Frontera Holdings LLC (Lead Case) 21-30354
Frontera Generation Limited Partnership 21-30353
Frontera Generation GP, LLC 21-30355
Frontera Generation Holdings LLC 21-30356
Frontera Intermediate Holding LLC 21-30357
Lonestar Pipeline Company, LLC 21-30358
Judge: Hon. David R. Jones
Debtors'
General
Bankruptcy
Counsel: Joshua A. Sussberg, P.C.
Matthew C. Fagen, Esq.
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, New York 10022
Tel: (212) 446-4800
Fax: (212) 446-4900
Email: joshua.sussberg@kirkland.com
matthew.fagen@kirkland.com
Debtors'
Local
Bankruptcy
Counsel: Matthew D. Cavenaugh, Esq.
Genevieve M. Graham, Esq.
Vienna F. Anaya, Esq.
Victoria Argeroplos, Esq.
JACKSON WALKER L.L.P.
1401 McKinney Street, Suite 1900
Houston, Texas 77010
Tel: (713) 752-4200
Fax: (713) 752-4221
Email: mcavenaugh@jw.com
ggraham@jw.com
vanaya@jw.com
vargeroplos@jw.com
Debtors'
Financial
Advisor or
Investment
Banker: PJT PARTNERS LP
Debtors'
Restructuring
Advisor: ALVAREZ & MARSAL NORTH AMERICA, LLC
Debtors'
Notice,
Claims &
Solicitation
Agent: PRIME CLERK LLC
https://cases.primeclerk.com/Frontera/Home-DocketInfo
Estimated Assets: $100 million to $500 million
Estimated Liabilities: $1 billion to $10 billion
The petitions were signed by Brant Meleski, vice president.
A full-text copy of Frontera Holdings LLC's petition is available
for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/2RJLQEQ/Frontera_Holdings_LLC__txsbke-21-30354__0001.0.pdf?mcid=tGE4TAMA
List of Debtors' 30 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
1. General Electric Trade Debt $9,067,307
Attn: Kevin J. Lagasse
Managing Director - GE Power
Generation Services
Attn: GE International Inc.
4200 Wildwood Parkway
Atlanta, GA 30339
United States
Tel: 404-709-1305
Fax: 678-844-5187
Email: klagasse@ge.com
2. Kinder Morgan Tejas Pipeline LLC Trade Debt $399,300
Attn: David Michels
Vice President and Chief Financial
Officer
1001 Louisiana St.
Suite 1000
Houston, TX 77002
United States
Tel: 713-420-4200
Email: david_michels@kindermorgan.com
3. NM Contracting LLC Trade Debt $64,128
Attn: Marcie Solano, Manager
2022 Orchid Ave
McAllen, TX 78504
United States
Tel: 956-499-8719
Email: msolano@nmcontracting.us
4. Nooter/Eriksen, Inc. Trade Debt $35,200
Attn: Michael Filla
Executive Vice President
1509 Ocello Drive
Fenton, MO 63026
United States
Tel: 636-651-1155
Email: mfilla@ne.com
5. Reladyne Reliability Trade Debt $8,000
Services Inc.
Attn: Larry Stoddard
President and Chief Executive Officer
8280 Montgomery Road, Suite 101
Cincinnati, OH 45236
United States
Tel: 513-489-6000
Email: larry.stoddard@reladyne.com
6. Industrial Site Services, LLC Trade Debt $7,027
Attn: Killie Randall
11510 Highway 188 East
Sinton, TX 78387
United States
Tel: 361-364-3022
Fax: 361-364-1382
Email: kellie@isstex.com
7. Skyhawk Chemicals Inc. Trade Debt $6,038
Attn: Jill Knickerbocker,
President
701 N Post Oak Rd Ste 540
Houston, TX 77024
United States
Tel: 713-957-2200
Fax: 713-957-0345
Email: jillk@skyhawkchemicals.com
8. Shrieve Chemical Company Trade Debt $5,557
Attn: Ted Threadgill
Vice President
1755 Woodstead Court
The Woodlands, TX 77380
United States
Tel: 281-367-4226
Email: tthreadgill@shrieve.com
9. Airgas USA, LLC Trade Debt $4,940
Attn: Pascal Vinet
Chief Executive Officer
259 North Radnor-Chester Road
Suite 100
Rndor, PA 19087
United States
Tel: 713-896-2718
Email: pascal.vinet@airgas.com
10. Abb Inc. Trade Debt $3,750
Attn: David Onuscheck
Senior VP & General Counsel
305 Gregson Drive
Cary, NC 27511
United States
Tel: 919-856-2360
Email: david.onuscheck@abb.com
11. Ferguson Enterprises Inc. #1869 Trade Debt $3,486
Attn: Jay Alls
Director of Industrial Business Group
c/o Wolseley Industrial Group
12500 Jefferson Avenue
Newport, VA 23602
United States
Tel: 703-472-7075
Fax: 757-989-2501
Email: jay.alls@ferguson.com
12. Atlas Copco Compressors LLC Trade Debt $3,386
Attn: Declan O'Regan
VP Corporate Development
300 Technology Center Way
Suite 550
Rock Hill, SC 29730
United States
Tel: 224-839-7696
Email: declan.oregan@atlascopco.com
13. Vertex Power Generation Trade Debt $3,262
Consulting, LLC
Attn: Ernie W McWilliams, Jr., Owner
15719 Pinewood Cove Dr
Houston, TX 77062
United States
Tel: 713-545-4825
Email: ernie.mcwilliams@vertexpgc.com
14. Endress+Hauser Inc. Trade Debt $2,747
Attn: Todd Lucey
Corporate Sales Director
2350 Endress Place
Greenwood, IN 46143
United States
Tel: 888-363-7377
Email: todd.lucey@endress.com
15. Juventus Chemicals & Equipment Trade Debt $2,036
Attn: Juventus Martinez
Chief Executive Officer
1003 W Kika De La Garza Loop
Mission, TX 78572
United States
Tel: 956-580-2568
Fax: 956-580-2520
Email: juventus@juventuschem.com
16. Verizon Wireless Trade Debt $1,670
Attn: Joan Bowyer
Vice President, Customer Service
1095 Avenue of the Americas
New York, NY 10036
United States
Tel: 216-765-1444
Email: joan.bowyer@verizonwireless.com
17. Fastenal Company Trade Debt $1,570
Attn: Daniel L. Florness
President and Chief Executive Officer
2001 Thurer Boulevard
Winona Thurer Boulevard
Winona, MN 55987
United States
Tel: 619-276-0957
Email: dflorness@fastenal.com
18. Molecule Software, Inc. Trade Debt $1,228
Attn: Sameer Soleja
Founder, President & CEO
3262 Westheimer Rd #887
21st Floor
Houston, TX 77098
United States
Tel: 512-656-3854
Email: sameer@molecule.io
19. Nalco Company Trade Debt $1,139
Attn: Darrell Brown
EVP and President - Global
Industrial
c/o Ecolab
1601 W. Diehl Rd.
Naperville, IL 60563
United States
Tel: 877-288-3512
Fax: 877-288-3513
Email: darrell.brown@ecolab.com
20. TNT Crane & Rigging Inc. Trade Debt $770
Attn: Deana Haygood
Chief Financial Officer
925 South Loop West
Houston, TX 74054
United States
Tel: 713-644-6113
Email: deana@tntcrane.com
21. Republic Services Inc. Trade Debt $633
Attn: Jeff Hughes
EVP, Chief Administrative Officer
18500 N Allied Way
Phoenix, AZ 85054
United States
Tel: 956-423-7316
Email: jeff.hughes@republicservices.com
22. Grande Oilfield, LLC Trade Debt $630
Attn: Dee Keeney
Office Manager
3300 Business 35E
Pearsall, TX 78061
United States
Tel: 830-746-0001
Email: dee.k@grandeoil.com
23. W.W. Grainger, Inc. Trade Debt $616
Attn: Donald G. MacPherson
Chief Executive Officer
100 Grainger Parkway
Lake Forest, IL 60045-5201
Tel: 847-535-1000
Email: dmacpherson@grainger.com
24. Copy Graphics Trade Debt $454
Attn: David Valdez
President
221 North 10th St.
McAllen, TX 78501
United States
Tel: 956-631-0205
Fax: 956-630-0205
Email: aescobar@copyg.com
25. Eastern Technical Associates Trade Debt $400
Attn: Jody Monk
General Manager
PO Box 1009
Garner, NC 27529
United States
Tel: 919-878-3188
Fax: 919-872-5199
Email: jody@smokeschool.com
26. Engineered Thermal Solutions Trade Debt $303
Attn: Chuck Marchetta, P.E.
Senior Process Cooling Engineer
164 Townline
Elma, NY 14059
United States
Tel: 713-906-7060
Email: chuck@engthermal.com
27. Office Depot Business Credit Trade Debt $281
Attn: Mark Faller
Director, Emerging Growth
6600 N Military TRL
Boca Raton, FL 33496
United States
Tel: 561-438-4800
Email: mark.faller@officedepot.com
28. AC Controls Trade Debt $238
Attn: Jim Borders, President
8600 Westmoreland Dr. NW
Concord, NC 28027
United States
Tel: 704-573-7005
Fax: 704-573-7008
Email: jim.borders@accontrols.com
29. FedEx Trade Debt $133
Attn: Dave Edmonds
Senior Vice President
942 South Shady Grove Rd
Memphis, TN 38120
United States
Tel: 615-641-3421
Email: dbedmonds@fedex.com
30. Biosan Laboratories Inc. Trade Debt $120
Attn: Randy Lauinger
Financial Controller
1950 Tobsal Court
Warren, MI 48091
United States
Tel: 586-755-8970
Fax: 586-755-8978
Email: randy@biosan.com
FRONTERA HOLDINGS: Enters Chapter 11 With Deal to Cut Debt by $800M
-------------------------------------------------------------------
Frontera Holdings LLC announced Feb. 3, 2021, that it has entered
into a Restructuring Support Agreement (RSA) with approximately 97
percent of its term loan lenders, 100 percent of its noteholders,
and its 100 percent equity holder, through which most of the
Company's debt will be converted into equity and the current term
loan and revolving credit facility lenders will become the new
owners of the Company. To advance this process, the Company has
filed voluntary petitions for reorganization under chapter 11 of
the U.S. Bankruptcy Code before the U.S. Bankruptcy Court for the
Southern District of Texas.
Throughout this process and beyond, the Company fully expects that
employees and vendors will continue to be paid and the Frontera
Energy Center will continue to generate electricity and serve its
customers. The Company's subsidiary entities in Mexico are not
included in the chapter 11 filing and also are continuing to
operate in the ordinary course of business.
"These actions represent an important milestone to reducing debt
and strengthening the Company for the benefit of our stakeholders,"
said Frontera CEO Lee Davis. "Frontera intends to use the
court-supervised process to create a sustainable capital structure
and position the Company to achieve long-term success."
The Company has entered into an RSA with holders of approximately
97 percent of its term loan debt and 100 percent of its secured
notes, along with the 100 percent equity holder Lonestar Generation
LLC, on the terms of a comprehensive financial restructuring.
Currently, Frontera has $773 million in debt under a secured term
loan and revolving credit facility, as well as $171 million in
secured notes. Under this agreement, lenders agree to convert a
substantial portion of the current term loan and revolving credit
facility debt into equity. Assuming approval by the Bankruptcy
Court, these lenders will become the new owners of the Frontera
Energy Center.
Frontera has secured $70 million in debtor-in-possession (DIP)
financing to ensure liquidity throughout the chapter 11 process.
The Company's liquidity position will allow the plant to operate
the business in the ordinary course and fund chapter 11
administrative costs. The DIP financing will be a part of $145
million in exit financing provided by lenders upon emergence from
chapter 11.
To ensure its ability to continue operating in the ordinary course
of business, Frontera is filing customary "first day" motions with
the court. Information about the case will be available through the
claims agent website at http://cases.primeclerk.com/Frontera.
About Frontera Holdings
Frontera Holdings operates a 526 MW combined cycle natural gas
plant near Mission, Texas, and exports power to Mexico.
On February 3, 2021, Frontera Holdings LLC and 5 affiliated debtors
(collectively, the "Debtors") each filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code
(Bankr. S.D. Tex. Lead Case No. No. 21-30354) to seek confirmation
of a debt-for-equity plan that would reduce debt by $800 million.
PJT Partners LP is serving as investment banker for the Company;
Kirkland & Ellis and Jackson Walker L.L.P. are serving as legal
counsel; and Alvarez & Marsal is serving as financial advisor.
Prime Clerk LLC is the claims agent.
Term loan lender advisors include Houlihan Lokey Inc. and Akin Gump
Strauss Hauer & Feld LLP.
Noteholder advisors include Silver Foundry, LP and Morgan, Lewis &
Bockius LLP.
FXI HOLDINGS: Moody's Completes Review, Retains B3 CFR
------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of FXI Holdings, Inc. and other ratings that are associated
with the same analytical unit. The review was conducted through a
portfolio review discussion held on January 22, 2021 in which
Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
FXI's B3 Corporate Family Rating is constrained by high leverage,
cyclical demand of its transportation, bedding and furniture end
markets, and governance risk related to aggressive financial
strategies under private equity ownership. The company's credit
profile is supported by its improved scale following its
acquisition of Comfort Holdings LLC (Innocor), strong market
position in the U.S. foam manufacturing industry and good end
market diversity through its transportation, bedding & furniture,
medical and technical end markets. FXI partially mitigates earnings
volatility associated with chemical prices with its customer
contracts that contain "chemical-collars".
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
GAINWELL ACQUISITION: Fitch Assigns First-Time 'B' LongTerm IDR
---------------------------------------------------------------
Fitch Ratings has assigned a Long-Term Issuer Default Rating (IDR)
of 'B' with a Stable Outlook to Gainwell Acquisition Corp. Fitch
has also assigned a senior secured first-lien term loan rating of
'BB-'/'RR2'. Fitch's actions affect approximately $4.2 billion of
outstanding and to-be-issued debt.
Gainwell is a software and solutions provider that operates
government Medicaid programs and other Health & Human Services
(HHS) initiatives. Gainwell's Medicaid Management Information
Systems (MMIS) operate as claims processing systems of record and
analytics support systems for the administration of state Medicaid
programs. The company's offerings span functions including,
provider enrollment, pre-authorization, pharmacy drug rebates,
recipient eligibility management, call center, print and mail
services, and more.
Fitch is evaluating Gainwell pending its agreement to carve out and
acquire certain assets of HMS Holdings Corp. that comprise the
company's capabilities focused on the Medicaid market. The addition
of HMS's products including, Coordination of Benefits (COB) and
Payment Integrity (PI), compliments Gainwell's existing modular
offerings and augments data analytics capabilities. The
transaction, backed by private equity sponsor, Veritas Capital,
values the carve-out at $2.4 billion to be financed by an
incremental $1.8 billion first-lien term loan and an incremental
$659 million second-lien term loan.
KEY RATING DRIVERS
Beneficial Tailwinds: Fitch expects Gainwell to benefit from strong
secular trends propelling growth in Medicaid expenditures. The
Centers for Medicare and Medicaid Services (CMS) forecasts Medicaid
expenditure growth of 5.6% per annum, approaching $1 trillion with
82 million beneficiaries by 2026, due to long-standing trends in
medical procedure/drug cost inflation and utilization, as well as
increased enrollment due to program expansions among states, an
increasing share of the aged and disabled beneficiaries served, and
the economic effects of the lockdowns.
In addition, CMS estimates $57 billion of improper payments by
Medicaid in 2019 due to complexity in determining eligibility and
claims processing, lack of sufficient documentation, shifting
regulatory requirements, fraud and waste. As a result, states,
suffering from increasingly constrained budgets, are strongly
incentivized to adopt Gainwell's software and data offerings in
order to contain costs. Fitch believes the secular tailwinds
provide for a dependable growth trajectory, benefiting the credit
profile.
Leading, Defensible Market Position: Gainwell is the leading
provider of software and services that enable Medicaid, serving as
a primary MMIS vendor to 29 states and spanning 41 states when
including adjacent offerings. The company covers 48 million
beneficiaries out of the 73 million total under Medicaid. Fitch
estimates a 20% share of the approximately $7.5 billion MMIS
services market is captured by the company, which is poised to
expand upon the acquisition of HMS.
Fitch believes the company's market position is highly defensible,
given the complexity and customization of an MMIS platform, as well
as the considerable cost and risk of disruption to Medicaid
services a state may face in replacing an MMIS provider. The
durability of the company's market position is evidenced by its
100% retention rates achieved over 10 years.
Acquisition Enhances Growth Opportunity: The company's acquisition
of HMS will add crucial capabilities in Coordination of Benefits
(COB) and Payment Integrity (PI). COB services improve states'
ability to adhere to the statutory requirement that Medicaid serve
as the payer of last resort by matching beneficiaries against a
database to identify other coverage, ensuring claims are allocated
to the responsible party and thus reducing improper spend.
Similarly, PI reduces improper spend by reviewing claims to ensure
that correct reimbursement rates are applied and that appropriate
medical services are performed. Fitch believes the addition of
HMS's products compliments Gainwell's existing modular offerings
and augments data analytics capabilities, strengthening the
company's cross-selling opportunities and potential to increase
client wallet share. In addition, HMS's relationship with 40 state
agencies provides opportunities to leverage existing relationships
in pursuit of new logo growth and additional cross-sales.
Low Cyclicality: Fitch expects Gainwell, which has generated
accelerated bookings growth though the pandemic, to continue to
exhibit low cyclicality for the foreseeable future. Fitch believes
the company will exhibit strong correlation to overall Medicaid
spending and enrollment, supported by the highly non-discretionary
nature of health expenditures.
In addition, Fitch notes the countercyclicality of Medicaid
enrollment, which typically experiences elevated growth during
economic downturns as job losses increase the pool of eligible
beneficiaries, in turn providing increased demand for the company's
software and service offerings. As a result, Fitch believes the
company will demonstrate a stable credit profile with little
sensitivity to macroeconomic cycles.
Regulatory Risks: Medicaid enrollment and expenditures growth are
heavily influenced by the regulatory framework governing the
program. As a result, Gainwell's growth may be meaningfully
affected by future legislative or regulatory change to this
framework, such as modifications to eligibility requirements,
reimbursement rates, MMIS certification standards, federal
financial participation (FFP) rates in MMIS implementations, or the
implementation of a work requirement for beneficiaries.
While these risks are notable, Fitch believes current regulatory
trends are constructive with 37 states adopting recent program
expansions and the likelihood for continued supportive policies
from the current administration. Any significant regulatory risk is
likely to be outside of the rating horizon.
Evolving Marketplace: Gainwell faces risks in the continually
evolving MMIS marketplace. MMIS implementations are overseen and
certified by CMS, who released guidance in 2016 to promote
modernization by encouraging states to construct and procure their
MMIS as a series of modules with increased interoperability, rather
than a single, rigid platform. Fitch believes these efforts
stimulate increased competition by reducing switching costs and
providing opportunities for the entry of additional vendors seeking
to develop niche solutions, which may lead to share erosion over
time.
In addition, the increased modular nature of MMIS enables
collaboration in procurement and implementation among states, which
may lead to a more competitive marketplace as the number of
addressable clients to sell into is effectively reduced. In its
most recent procurement analysis report, the state of Colorado
estimated the cost of design, development, implementation (DDI) at
$50 million - $100 million.
Increasingly constrained state budgets encourage the engagement of
organizations such as the National Association of State Procurement
Officers (NASPO), that seek to enable greater collaboration through
efforts such as its ValuePoint program. However, despite the
potential for increased competition, Fitch believes the risk of
lost wallet share is moderated by Gainwell's large installed base
that positions it as an entrenched provider of the core, underlying
platform.
High Leverage: Gainwell is acquiring certain assets of HMS in a
deal valued at $2.4 billion, financed with incremental term loans
under the existing credit agreements. Fitch calculates initial pro
forma leverage of 8.0x, well above the 6.25x and 5.6x median for
technology issuers in the 'B' category and for Fitch-rated
healthcare IT issuers, respectively.
Fitch believes already actioned cost reduction efforts at the core
Gainwell business, along with targeted synergies in the HMS
acquisition provides the opportunity for a rapid step-down in
leverage to 6.6x in FY 2023, with minimal further reduction
thereafter. Fitch believes the leverage is supported by the
company's dependable growth prospects, strong market position, low
capital intensity and lack of cyclicality.
DERIVATION SUMMARY
Fitch is evaluating Gainwell pending its acquisition of certain HMS
assets that comprise the product areas dedicated to the
administration of state Medicaid programs in a transaction backed
by private equity sponsor, Veritas Capital. Fitch believes the
company benefits from favorable tailwinds as the underlying growth
of Medicaid, constrained state budgets, constructive regulatory
environment and long-standing trends in U.S. healthcare including,
an aging demographic, medical procedure/drug cost inflation and
utilization growth are supportive of adoption of the company's
software and services.
The combination with HMS bolsters the company's modular offerings
to generate significant cross-selling opportunities in the existing
client base. Fitch believes growth is further ensured by the
company's leading share, strong client retention rates, high
switching costs and continued Medicaid program expansions among
states.
Finally, as the company experienced accelerated bookings growth
during the pandemic-led downturn, Fitch expects the company to
demonstrate minimal cyclicality and durable resistance to economic
cycles due to the counter cyclical aspects of Medicaid enrollment.
While Fitch views the high visibility into revenue growth
positively, the company faces longer-term risks from an evolving
marketplace and the potential for future regulatory changes that
may increase competition or reduce growth in Medicaid expenditures
and enrollment over time.
The company profitability metrics score mostly in line in respect
of peers with Fitch forecasting EBITDA margin expansion of 300bps
over the ratings horizon to a level moderately above the 32%
average for Fitch-rated healthcare IT peers. Fitch also expects
consistent FCF margins in the low teens over the forecast horizon
due to expanding EBITDA margins and low capital intensity,
resulting in strong FCF conversion. Fitch believes FCF will be
sustainable due the low cyclicality and a supportive regulatory
environment in the medium term.
Despite these favorable characteristics, Fitch calculated pro forma
leverage of 8.0x is materially higher than the 6.25x median for
technology issuers in the 'B' ratings category. However, Fitch
expects a rapid one-time reduction in leverage to 6.6x in FY 2023
due to achievement of already actioned cost reduction programs in
Gainwell and synergy opportunities from the acquisition of HMS.
While the company clearly benefits from beneficial secular
tailwinds, a leading, defensible market position, and low
cyclicality, Fitch views leverage as the primary determinant of the
'B' rating. No Country Ceiling, parent/subsidiary or operating
environment aspects had an impact on the rating.
KEY RECOVERY RATING ASSUMPTIONS
-- The recovery analysis assumes that Gainwell would be
reorganized as a going-concern in bankruptcy rather than
liquidated.
-- Fitch has assumed a 10% administrative claim.
Going-Concern (GC) Approach
The GC EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
enterprise valuation (EV). Fitch contemplates a scenario in which
the increasing modularization of MMIS offerings results in elevated
competition and loss of share for Gainwell, leading to decreased
revenue growth and higher investment into sales and R&D to address
the challenges.
As a result, Fitch expects Gainwell would likely be reorganized
with a similar product strategy and higher than planned levels of
operating expenses as the company reinvests to develop competing
products, ensure customer retention and defend against
competition.
Under this scenario, Fitch believes EBITDA margins would decline
such that the resulting GC EBITDA is approximately 15% below Fitch
forecast FY 2022 pro forma EBITDA.
An EV multiple of 7.0x EBITDA is applied to the GC EBITDA to
calculate a post-reorganization enterprise value.
The choice of this multiple considered the following factors:
Comparable Reorganizations: In Fitch's "Telecom, Media and
Technology Bankruptcy Enterprise Values and Creditor Recoveries
(2020 Fitch Case Studies)" case study, Fitch notes seven past
reorganizations in the technology sector, where the median recovery
multiple was 4.9x. Of these companies, only two were in the
software subsector: Allen Systems Group, Inc. and Aspect Software
Parent, Inc., which received recovery multiples of 8.4x and 5.5x,
respectively. Fitch believes the Allen Systems Group, Inc.
reorganization is highly supportive of the 7.0x multiple assumed
for Gainwell given the mission critical nature of both companies'
offerings.
M&A Multiples: A study of 168 precedent transactions in the
healthcare IT industry during 2010-2017 established median
EV/EBITDA transaction multiples ranging 10x to 16x, depending on
the specific product area. In addition, HMS is being acquired at a
15.5x multiple, excluding synergies.
Fitch evaluated a number of qualitative and quantitative factors
that are likely to influence the GC valuation:
-- 1) Secular trends and regulatory environment are highly
supportive with Medicaid enrollment and expenditure growth
resulting from program expansions, looser eligibility
standards leading to a higher share of the aged and
disabled beneficiaries served, and increased claims
processing complexity. In addition, constrained state
budgets encourages of adoption of the company's products
that reduce improper Medicaid spend;
-- 2) Barriers to entry are high relative to software issuers, as
deep domain and regulatory expertise are required to
develop necessary solutions;
-- 3) Gainwell is the leading provider of MMIS with the next
largest commercial competitor covering roughly 95% fewer
beneficiaries;
-- 4) Revenue and cash flow outlook is favorable as long-standing
secular trends are supportive of revenue growth, while
moderate margin expansion and low capital intensity promote
FCF margins in the low teens;
-- 5) Revenue certainty is high as a result of the 92% recurring
revenue profile, typical contract duration of 6 to 10
years, 100% client retention and the countercyclicality of
Medicaid; and
-- 6) Operating leverage is durable given a highly variable cost
structure typical of software developers.
Fitch believes these factors reflect a particularly attractive
business model that is likely to generate significant interest,
resulting in a recovery multiple at the high-end of Fitch's range.
The recovery model implies a 'BB' and 'RR1' Recovery Rating for the
company's first-lien senior secured facilities, reflecting Fitch's
belief that lenders should expect to recover 91% or greater in a
restructuring scenario.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Transaction: Gainwell acquires HMS assets representing product
offerings for administration of state Medicaid programs for
$2.4 billion, financed by an incremental $1.8 billion 1L term
loan and an incremental $659 million 2L term loan.
-- Revenue: FY 2021 - FY 2022 organic growth of 5% - 6%,
consistent with recent trends and management forecasts,
followed by FY 2023 organic growth of 13% due to elevated
bookings during FY 2021, returning to 2% - 3% organic growth
thereafter, consistent with Medicaid enrollment forecasts.
-- Margins: EBITDA margin expansion of 300bps over the ratings
horizon due to actioned margin improvement initiatives at
Gainwell and partial achievement of synergies at HMS.
-- Capex: Capital intensity of 2.5%, consistent with management
forecasts and history.
-- M&A: Bolt-on acquisitions of $100 million per annum in FY 2023
and FY 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- (Cash flow from operations - capex)/total debt with equity
credit sustained above 6.5%.
-- Total debt with equity credit/operating EBITDA sustained below
5.5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- (Cash flow from operations - Capex)/total debt with equity
credit sustained below 5%.
-- Total debt with equity credit/operating EBITDA sustained above
7.5x.
-- Erosion of the company's competitive advantage or market
position.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Liquidity Supported by Strong FCF: Fitch expects Gainwell to build
liquidity rapidly following the transaction given moderate EBITDA
margin expansion, a highly variable cost structure, low capital
intensity, supportive secular trends, and minimal sensitivity to
macroeconomic cycles, which enable the company to generate
consistently strong FCF.
Pro forma for the transaction, liquidity is expected to be
comprised of nearly $200 million in cash and an undrawn $400
million revolving credit facility (RCF). Fitch forecasts steady
growth in liquidity, approaching $700 million by FY 2023 due to
accumulation of FCF of nearly $300 million per annum after the
transaction is completed and the expectation for the RCF to remain
undrawn.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
Environmental, Social and Corporate Governance (ESG) Credit
Relevance is a Score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
GARRETT MOTION: Hires Perella Weinberg as Investment Banker
-----------------------------------------------------------
Garrett Motion Inc. and its affiliates seek approval from the U.S.
Bankruptcy Court for the Southern District of New York to employ
Perella Weinberg Partners LP as their investment banker.
The firm will provide these services:
-- provide financial advice to the Debtors in structuring and
effecting a financing, identify potential investors and contact and
solicit such investors; and
-- assist in the arranging of a financing, including identifying
potential sources of capital, assisting in the due diligence
process, and negotiating the terms of any proposed financing.
The Debtors are seeking approval of the "equity financing fee"
equal to 4 percent of all gross proceeds from the
issuance of any new equity or equity-linked security issued by the
Debtor, payable upon the closing of any financing.
Bruce Mendelsohn, a partner at Perella Weinberg, disclosed in court
filings that the firm is a "disinterested person" as the term is
defined in Section 101(14) of the Bankruptcy Code.
Perella Weinberg can be reached at:
Bruce Mendelsohn
Perella Weinberg Partners LP
767 Fifth Avenue
New York, NY 10153
Tel: (212) 287-3200
Fax: (212) 287-3201
About Garrett Motion
Based in Switzerland, Garrett Motion Inc. (NYSE: GTX) designs,
manufactures and sells highly engineered turbocharger and
electric-boosting technologies for light and commercial vehicle
original equipment manufacturers and the global vehicle and
independent aftermarket.
Garrett Motion and its affiliates sought Chapter 11 protection
(Bankr. S.D.N.Y. Lead Case No. 20-12212) on Sept. 20, 2020.
Garrett disclosed $2.066 billion in assets and $4.169 billion in
liabilities as of June 30, 2020.
The Debtors tapped Sullivan & Cromwell LLP as counsel, Quinn
Emanuel Urquhart & Sullivan LLP as co-counsel, Perella Weinberg
Partners and Morgan Stanley & Co. LLC as investment bankers, and
AlixPartners LP as restructuring advisor. Kurtzman Carson
Consultants LLC is the claims agent.
On Oct. 5, 2020, the U.S. Trustee for Region 2 appointed a
committee to represent unsecured creditors in the Debtors' Chapter
11 cases. White & Case LLP and Conway MacKenzie, LLC serve as the
committee's legal counsel and financial advisor, respectively.
GATEWAY FOUR: Case Trustee Seeks to Use Cash Collateral
-------------------------------------------------------
David K. Gottlieb, the Chapter 11 Trustee of Gateway Four LLP and
its debtor-affiliates, asks the U.S. Bankruptcy Code for the
Central District of California, San Fernando Valley Division, for
entry of an order approving, on an interim basis, the concurrently
filed Stipulation Authorizing Chapter 11 Trustee To Continue Using
The Cash Collateral Of The Gateway Four, LP Bankruptcy Estate.
The Stipulation was entered into by and between the Trustee and
Romspen Mortgage Limited Partnership.
The Trustee also asks the Court to schedule a final hearing and
grant related relief.
The Trustee requires the use of cash collateral in the Gateway Four
estate to pay all of the Gateway Four expenses as set forth in a
revised short-term budget.
The primary asset of the Gateway Four bankruptcy estate is a real
property and improvements located thereon in the City of El Monte,
California, comprising a partially constructed apartment building
with retail space on the street level.
The Los Angeles County Treasurer - Tax Collector, Romspen, and
Crane Rental Service, Inc., have recorded liens against Gateway
Four's real property. Romspen has recorded a UCC-1 financing
statement against Gateway Four.
In addition, these parties may assert mechanic lien claims against
Gateway Four: KPRS; Kreit Mechanical Association, Inc.; Largo
Concrete, Inc.; Southwest Carpenters Union; CraneVeyor; Grand Doors
& Windows; Junior Steel; McParlane Associates, Inc.; Champion
Lumber Company, Inc.; HD Supply Construction Supply Ltd. d/b/a
Supply White Cap Construction Supply; and OneSource Distributors,
LLC.
As of February 1, 2021, the Trustee remains in possession of
approximately $484,400 of funds, which are comprised of proceeds
still remaining from the post-petition financing provided to the
Trustee on behalf of the Gateway Four bankruptcy estate.
The Trustee is continuing to explore the best way to complete the
construction of the Gateway Four Property and comply with various
requirements of the City of El Monte. In order for the Trustee to
do so, the Trustee intends to continue with the administration of
the Gateway Four bankruptcy estate and pay the post-petition
expenses associated with the Gateway Four bankruptcy estate and the
Gateway Four Property that are currently accruing.
The Trustee has presented Romspen with a proposed budget which
would enable the Trustee to continue administering the Gateway Four
bankruptcy estate through March 14, 2021, solely through the use
of the Remaining Gateway Four Estate Funds. Both the Trustee and
Romspen understand that the Trustee's ability to continue to
administer the Gateway Four bankruptcy estate beyond March 14 will
be dependent upon the Trustee's ability to obtain additional
post-petition financing since the Gateway Four Property does not
generate any revenue.
Romspen has agreed to consent to the Trustee's use of the Remaining
Gateway Four Estate Funds to pay the expenses set forth in the
Budget in accordance with and subject in all respects to the terms
of the Interim DIP Financing/Cash Collateral Order and the Final
DIP Financing/Cash Collateral Order.
Furthermore, the Trustee submits that the value of all the interest
of any other party in the cash collateral will be adequately
protected because the adequate protection provided to all interest
holders pursuant to the Interim DIP Financing/Cash Collateral Order
and Final DIP Financing/Cash Collateral Order will remain in
effect.
A copy of the motion and the Debtor's budget through the week of
March 14 is available for free at https://bit.ly/3rgsOoX from
PacerMonitor.com.
About Gateway Four LLP
Gateway Four LP and its affiliates Gateway Two LP and Gateway Five
LLC sought protection under Chapter 11 of the Bankruptcy Code
(Bankr. C.D. Cal. Lead Case No. 20-11581) on Aug. 31, 2020. In the
petition signed by its president, James Acevedo, Gateway Four
disclosed up to $100 million in assets and up to $50 million in
liabilities.
Judge Martin R. Barash oversees the case.
Daniel M. Shapiro, Esq., Attorney at Law serves as the Debtors'
counsel, and the Law Office of Sevan Gorginian as co-counsel.
David K. Gottlieb of D. Gottlieb & Associates, LLC, has been
appointed as Chapter 11 Trustee. He is represented by:
Ron Bender, Esq.
Krikor J. Meshefejian, Esq.
LEVENE, NEALE, BENDER, YOO & BRILL L.L.P.
10250 Constellation Boulevard, Suite 1700
Los Angeles, CA 90067
Telephone: (310) 229-1234
Facsimile: (310) 229-1244
E-mail: RB@LNBYB.COM
KJM@LNBYB.COM
GENERATION ZERO: Cases Dismissed as Bad Faith Filing
----------------------------------------------------
Judge J. Craig Whitley of the United States Bankruptcy Court for
the Western District of North Carolina, Charlotte Division, granted
the motion to dismiss the jointly administered cases captioned In
re: GENERATION ZERO GROUP, INC. and FIND.COM URL HOLDING, LLC,
Chapter 11, Debtors, Case No. 20-30319, (Jointly Administered)
(Bankr. W.D.N.C.).
Certain secured creditors, by and through counsel and the
collateral agent, Phoenix Restructuring, Inc., filed a Motion to
Dismiss as Bad Faith Filing, or in the Alternative, Motion for
Relief From the Automatic Stay seeking dismissal of the jointly
administered cases pursuant to Section 1112(b) of the Bankruptcy
Code, or alternatively, relief from the automatic stay pursuant to
section 362(d) and Rule 4001 of the Bankruptcy Rules of Procedure.
Judge Whitley agreed with the Movants and concluded that cause
exists such that these chapter 11 proceedings should be dismissed.
Judge Whitley found that the bankruptcy petition filed on behalf of
URL Holding, LLC, filed March 13, 2020, must be dismissed because
the bankruptcy petition was not authorized by the active and
authorized Directors of URL Holding. The judge found that Richard
Morrell, who executed the Voluntary Petition on behalf of URL
Holdings as its President, and not as a Director, was not
authorized to file URL Holding into bankruptcy pursuant to its
operating agreement or the Georgia code.
Judge Whitley also concluded that cause exists to dismiss these
chapter 11 proceedings pursuant to the well-developed Fourth
Circuit precedent in Carolin Corp. v. Miller, 886 F.2d 693 for
objective futility and and subjective bad faith of the debtor.
Judge Whitley determined that the reorganization efforts of the
Debtors are objectively futile. Based upon the Debtors'
allegations in the adversary proceeding complaint, the testimony at
the 341 Meeting of Creditors of the Debtors' purported
representative, and the Debtors filing in this case, the judge
found that: (i) the Debtors have no viability of organization, (ii)
have no current employees with URL Holding never having employees
and Generation Zero failing to have any employees since 2017, (iii)
neither Debtor having realized any gross revenue since 2018, and
(iv) Generation Zero is unable to trade publicly on the stock
exchange as Morrell has failed to file the necessary reporting with
the SEC.
Judge Whitley also determined that the Debtors' filing of the
voluntary petition was completed with subjective bad faith. The
judge found that there is currently only one primary asset of
potential, if unknown, worth between the Debtors -- the domain name
of "Find.com" -- and that this domain name is totally encumbered.
It is also undisputed that neither Debtor has any employees and has
not had employees since late 2017. The judge also found that the
Debtors have no cash flow whatsoever, as revealed by the scheduled
gross revenue of $0.00 for the years, 2018, 2019 and 2020 up
through the petition date. Judge Whitley also discovered that a
large portion of the unsecured debt scheduled by the Debtors is
debt furnished by insiders. While the domain name had not been in
foreclosure, the Movants made demand on the Debtors to surrender
the domain name and the collateral through joint foreclosure.
Judge Whitley concluded that the bankruptcy filing was clearly the
only way to forestall the Movants in exercising their rights.
"They wish to use the bankruptcy forum to recharacterize the
Movants perfected debt as equity to subordinate it to the general
unsecured debt, of which the lion's share is owed to Morrell. In
short, these cases are last shot efforts by Morrell to attack the
secured creditors in order to collect on his debts. The Carolin
factors as well as the non-exhaustive factors enumerated in section
1112(b)(4) fall in favor of the Movants," said the judge.
A full-text copy of Judge Whitley's order dated January 26, 2021 is
available at https://tinyurl.com/y2serjrf from Leagle.com.
About Generation Zero
Generation Zero Group Inc. and Find.Com URL Holding filed a Chapter
11 bankruptcy petition (Bankr. W.D.N.C. Case No. 20 30319) on March
13, 2020. Their primary asset is the internet domain name
Find.Com. The Domain Name is owned by URL Holding which is a
wholly-owned subsidiary of GNZR. URL Holding is an entity formed
for the sole purpose of owning the Domain Name. Richard Morrell is
their sole director and chief executive officer.
Judge J. Craig Whitley is the case judge. The Debtors tapped BGW
CPA, PLLC as its accountants, and Felton Parrish as an attorney.
No trustee, examiner, or statutory committee of creditors has been
appointed in these chapter 11 cases.
GENESIS VASCULAR: U.S. Trustee Unable to Appoint Committee
----------------------------------------------------------
The U.S. Trustee for Region 21 on Feb. 3 disclosed in a court
filing that no official committee of unsecured creditors has been
appointed in the Chapter 11 case of Genesis Vascular of Pooler,
LLC.
About Genesis Vascular of Pooler
Genesis Vascular of Pooler, LLC -- https://genesisghc.com -- a
division of Genesis Global HealthCare, is focused on delivering
vascular care to patients with Peripheral Vascular Disease
(P.V.D.), including limb salvage and wound management.
Genesis Vascular of Pooler filed its voluntary petition for relief
under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Ga. Case No.
21-40001) on Jan. 4, 2021. Howard Gale, M.D., corporate
representative, signed the petition.
At the time of the filing, the Debtor disclosed $197,217 in total
assets and $1,160,455 in total liabilities.
Judge Edward J. Coleman III oversees the case. Merrill & Stone, LLC
serves as the Debtor's legal counsel.
GENEVER HOLDINGS: Hires Goldberg Weprin as Bankruptcy Counsel
-------------------------------------------------------------
Genever Holdings LLC seeks approval from the U.S. Bankruptcy Court
for the Southern District of New York to employ Goldberg Weprin
Finkel Goldstein LLP as its bankruptcy counsel.
The firm will provide these legal services:
(a) provide the Debtor with necessary legal advice in
connection with the Chapter 11 case and its responsibilities and
duties as a debtor-in-possession;
(b) represent the Debtor in all proceedings before the
Bankruptcy Court and/or United States Trustee;
(c) prepare all necessary legal papers, petitions, orders,
applications, motions, reports and plan documents on the Debtor's
behalf;
(d) perform all other legal services for the Debtor which may
be necessary to obtain a successful conclusion of the Chapter 11
case.
The firm received a pre-petition retainer in the sum of $25,000
plus $2,000 for the filing fee and noticing. The unused portion of
the retainer of approximately $7,500 shall be credited as part of
the firm's final application for professional fees and expenses.
The firm's current billing rates for bankruptcy and real estate
matters are $575 per hour for partner time and between $275 to $425
for associate time.
Kevin J. Nash, a member of the firm of Goldberg Weprin Finkel
Goldstein LLP, disclosed in court filings that the firm is a
"disinterested person" as that term is defined in section 101(14)
of the Bankruptcy Code.
The firm can be reached through:
Kevin J. Nash, Esq.
GOLDBERG WEPRIN FINKEL GOLDSTEIN LLP
1501 Broadway, 22nd Floor
New York, NY 100136
Telephone: (212) 221-5700
Facsimile: (212) 730-4518
E-mail: knash@gwfglaw.com
About Genever Holdings
Genever Holdings is the owner of the entire 18th Floor Apartment
and auxiliary units in the Sherry Netherland Hotel located at 781
Fifth Avenue, New York, NY 10022.
Genever Holdings LLC filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Case No.
20-12411) on Oct. 12, 2020. The petition was signed by Yanping
Wang, authorized representative. At the time of filing, the Debtor
estimated $50 million to $100 million in both assets and
liabilities. Kevin J. Nash, Esq. at Goldberg Weprin Finkel
Goldstein LLP serves as the Debtor's counsel.
GI DYNAMICS: Extends Stock Offering Final Closing Date to Feb. 24
-----------------------------------------------------------------
Effective as of Jan. 29, 2021, GI Dynamics, Inc. entered into a
Fourth Amendment to the Series A Preferred Stock Purchase
Agreement, by and between the Company and Crystal Amber Fund
Limited, as the purchaser, pursuant to which the Company and
Crystal Amber agreed to further extend the final closing date of
the offering of Series A Preferred Stock from Jan. 29, 2021 to Feb.
24, 2021.
About GI Dynamics
Founded in 2003 and headquartered in Boston, Massachusetts, GI
Dynamics, Inc. (ASX:GID) is a developer of EndoBarrier, an
endoscopically-delivered medical device for the treatment of type 2
diabetes and the reduction of obesity. EndoBarrier is not approved
for sale and is limited by federal law to investigational use only.
EndoBarrier is subject to an Investigational Device Exemption by
the FDA in the United States and is entering concurrent pivotal
trials in the United States and India.
GI Dynamics reported a net loss of $17.33 million for the year
ended Dec. 31, 2019, compared to a net loss of $8.04 million for
the year ended Dec. 31, 2018. As of Sept. 30, 2020, the Company
had $6.45 million in total assets, $4.88 million in total
liabilities, $5.32 million in redeemable preferred stock, and a
total stockholders' deficit of $3.76 million.
Wolf and Company, P.C., in Boston, Massachusetts, the Company's
auditor since 2019, issued a "going concern" qualification in its
report dated March 26, 2020 citing that the Company has suffered
losses from operations since inception and has an accumulated
deficit and working capital deficiency that raise substantial doubt
about the Company's ability to continue as a going concern.
GIRARDI & KEESE: Trustee Hands Off SoCalGas Case to Frantz Firm
---------------------------------------------------------------
Holly Barker of Bloomberg Law reports that the deal Girardi Keese
LLP's trustee struck with Frantz Law Group to assume responsibility
for the thousands of Southern California Gas Co. leaks litigation
cases the firms handled together as co-counsel won the bankruptcy
court's approval.
Judge Barry Russell, for the U.S. Bankruptcy Court for the Central
District of California, also announced during Tuesday's, February
2, 2021, hearing that he would approve the trustee's decision to
reject an agreement GK entered into with Abir Cohen Treyzon & Salo
LLP to take over GK's cases.
The agreement, entered into about a month before the bankruptcy
petition was filed in December 2020, was clearly executory, Judge
Russell said, concluding the trustee was within her rights to
reject it.
ACTS will be able to keep the clients it has already retained,
however.
The trustee also sought a temporary restraining order to prevent
ACTS from continuing to contact the firm's clients, after ACTS sent
emails soliciting representation. But Judge Russell hadn't
understood that the parties were fighting over more than the 8,000
or so gas leak cases GK had been responsible for, so the scope of
any final restraining order against ACTS is yet to be determined.
ACTS agreed to provide a list of the matters for which it had
already assumed responsibility from Girardi Keese, including gas
leaks clients, as well as a list of the clients with whom it says
it had already been discussing representation. In the meantime,
Judge Russell granted the TRO preventing ACTS from any further
solicitation of former GK clients.
Anticipated attorneys' fees from the gas leaks cases are believed
to be the now defunct firm's most significant asset. The trustee is
still working to sort out how she should hand off the firm’s
other clients, to both protect their interests and preserve the
estate’s assets.
The deals are, of course, contingent on clients agreeing to the new
representation.
Counsel for SoCalGas attended the Tuesday hearing after filing a
statement that said it "supports the proposed settlement to the
extent that it may accelerate the resolution of the Debtor's
clients' claims," even though GK would accept 5% less of the
contingency fee than the firms originally agreed on in the joint
representation. Under the trustee's agreement with Frantz, GK is
entitled to 45% of fees, and Frantz is entitled to 55%.
Russell wasn't interested in hearing what the gas leak defendant's
view was on the selection of plaintiffs' counsel and initially told
counsel for the company not to speak, believing it had no standing
in the bankruptcy proceedings. But SoCalGas corrected him: The firm
has apparently not paid its gas bill, so the gas leaks defendant
also happens to be a creditor.
Even so, Russell said the written filing was enough. He wouldn't
strike it, but declined to allow the company to speak further.
The trustee is Elissa D. Miller, and the estate is represented by
Smiley Wang-Ekvall LLP. Frantz is represented by Quinn Emanuel
Urquhart & Sullivan LLP.
About Girardi & Keese
Girardi and Keese or Girardi & Keese was a Los Angeles-based law
firm founded in 1965 by lawyers Thomas Girardi and Robert Keese. It
served clients in California in a variety of legal areas. It was
known for representing plaintiffs against major corporations.
An involuntary Chapter 7 petition (Bankr. C.D. Cal. Case No.
20-21022) was filed in December 2020 against GIRARDI KEESE by
alleged creditors Jill O'Callahan, Robert M. Keese, John Abassian,
Erika Saldana, Virginia Antonio, and Kimberly Archie.
The petitioners' attorneys:
Andrew Goodman
Goodman Law Offices, Apc
Tel: 818-802-5044
E-mail: agoodman@andyglaw.com
Elissa D. Miller, a member of the firm SulmeyerKupetz, has been
appointed as Chapter 7 trustee.
The Chapter 7 trustee can be reached at:
Elissa D. Miller
333 South Grand Ave., Suite 3400
Los Angeles, California 90071-1406
Telephone: 213.626.2311
Facsimile: 213.629.4520
E-mail: emiller@sulmeyerlaw.com
GIRARDI & KEESE: Trustee Objects to Guardian Ad Litem Appointment
-----------------------------------------------------------------
Holly Barker of Bloomberg Law reports that the trustee overseeing
Girardi Keese LLP's bankruptcy, after a Chapter 7 petition was
filed against the now defunct law firm in December 2020, opposes
the appointment of a guardian ad litem to represent the firm's
interests in the case.
Girardi Keese is an entity, not a person, and an entity "cannot be
incompetent," Elissa D. Miller said in the statement filed in the
U.S. Bankruptcy Court for the Central District of California on
Tuesday.
Robert Girardi cited no legal basis for his appointment to serve as
guardian ad litem, alleging only that his brother, firm owner
Thomas Girardi, is incompetent, Miller said.
Miller argues that a guardian ad litem wouldn't add any benefit or
serve in a role any different than the trustee. Robert Girardi's
motion is "devoid of any evidence" that he had any relationship
with, or knowledge of, the firm, Miller said.
Meanwhile, Jason Rund, the trustee in parallel Chapter 7
proceedings against Thomas Girardi personally, filed a statement
Tuesday, February 2, 2021, saying he agreed with an opposition
filed by creditor Edelson PC, insofar as it argues that "the state
probate court is the proper court to make the determination" as to
Girardi's competency. Rund argues that the bankruptcy court should
defer to that determination.
The California probate court granted in part a petition filed by
Robert Girardi to appoint him as temporary conservator Monday, Feb.
1, 2021, to allow him "the power to contract" on behalf of his
brother. The court deferred the remainder of the petition to March
15, 2021.
Edelson PC, who served as local co-counsel for plaintiffs
represented by GK in litigation over the 2018 Lion Air crash, is
separately suing GK, Thomas Girardi, his estranged wife, and Real
House Wives of Beverly Hills star and performer Erika Jayne, along
with former attorneys at the firm who handled the Lion Air matters,
over unpaid fees.
They are also pushing to hold the former GK attorneys in
civil—and if not civil, then criminal—contempt, for failing to
ensure that settlement proceeds were paid in full to their shared
clients. Thomas Girardi was found in civil contempt in December
after admitting that at least $2 million in client settlement funds
haven’t been forwarded.
Both of those matters are ongoing in the U.S. District Court for
the Northern District of Illinois.
Thomas Girardi trustee Rund is represented by Levene, Neale,
Bender, Yoo & Brill LLP. GK trustee Miller is represented by Smiley
Wang-Ekvall LLP.
The federal bankruptcy cases are In re Girardi Keese, Bankr. C.D.
Cal., No. 2:20-bk-21022-BR, trustee's opposition 2/2/21 and In re
Girardi Keese, Bankr. C.D. Cal., No. 2:20-bk-21022, trustee's
statement 2/2/21.
About Girardi & Keese
Girardi and Keese or Girardi & Keese was a Los Angeles-based law
firm founded in 1965 by lawyers Thomas Girardi and Robert Keese.
It served clients in California in a variety of legal areas. It
was known for representing plaintiffs against major corporations.
An involuntary Chapter 7 petition (Bankr. C.D. Cal. Case No.
20-21022) was filed in December 2020 against GIRARDI KEESE by
alleged creditors Jill O'Callahan, Robert M. Keese, John Abassian,
Erika Saldana, Virginia Antonio, and Kimberly Archie.
The petitioners' attorneys:
Andrew Goodman
Goodman Law Offices, Apc
Tel: 818-802-5044
E-mail: agoodman@andyglaw.com
Elissa D. Miller, a member of the firm SulmeyerKupetz, has been
appointed as Chapter 7 trustee.
The Chapter 7 trustee can be reached at:
Elissa D. Miller
333 South Grand Ave., Suite 3400
Los Angeles, California 90071-1406
Telephone: 213.626.2311
Facsimile: 213.629.4520
E-mail: emiller@sulmeyerlaw.com
GLOBAL EAGLE: Further Fine-Tunes Plan Documents
-----------------------------------------------
Global Eagle Entertainment Inc. and its affiliated debtors filed a
Second Amended Joint Plan of Liquidation and a Disclosure Statement
on January 26, 2021.
The Second Amended Joint Plan reflects the terms of the Committee
Settlement among the Debtors, the Committee, and the Ad Hoc DIP and
First Lien Lender Group in respect of the Committee Sale Objection
pursuant to which GEE Acquisition Holdings Corp. (the purchaser)
will (a) pay up to $8.5 million in cash in Additional Sale
Consideration to be distributed in accordance with the terms of
this Plan, and (b) through funding of the Wind-Down Reserve and the
Professional Fee Escrow in accordance with the Wind-Down Budget,
pay all amounts as necessary to ensure the satisfaction of all
Administrative Claims, Other Priority Claims, Priority Tax Claims,
and Professional Fee Claims under this Plan.
GEE Acquisition is a special purpose entity formed for the benefit
of the first-lien lenders which, agreed to credit bid a portion of
their first-lien claims. The first-lien lenders include Apollo
Global Management Inc.
Like in the prior iteration of the Plan, each holder of an Allowed
General Unsecured Claim will receive its Pro Rata Share of the
Class 3b and 3c Additional Sale Consideration Amount to which it is
entitled.
Prior to or on the Effective Date, the Debtors shall be authorized
to consummate the Sale Transaction to the Purchaser pursuant to the
terms of the Sale Order and the applicable Sale Transaction
Documents, including, without limitation, (i) selling the Acquired
Assets (as defined in the Asset Purchase Agreement) free and clear
of claims, liens and encumbrances except to the extent set forth in
the Asset Purchase Agreement and (ii) assuming and assigning to the
Purchaser pursuant to the Asset Purchase Agreement in connection
with the Sale Transaction certain Executory Contracts and Unexpired
Leases.
Distributions under the Plan shall be funded from the Additional
Sale Consideration Escrow Account, the Wind-Down Reserve or the
Professional Fee Escrow Account, as applicable, in accordance with
the WindDown Budget upon consummation of the Sale Transaction. In
addition, on the Effective Date, the Plan Administrator shall sign
the Plan Administration Agreement and will accept, on behalf of
Holders of Allowed Claims entitled to distributions under the Plan,
the Plan Administration Assets. The Additional Sale Consideration
Escrow Account and the Wind-Down Reserve, but not the Professional
Fee Escrow Account, shall vest in the Debtors and their Estates
pursuant to Article V.D of the Plan as Plan Administration Assets.
Counsel for Debtors:
LATHAM & WATKINS LLP
Ted A. Dillman
Helena G. Tseregounis
Nicholas J. Messana
355 South Grand Avenue, Suite 100
Los Angeles, California 90071
Telephone: (213) 485-1234
Facsimile: (213) 891-8763
E-mail: ted.dillman@lw.com
helena.tseregounis@lw.com
nicholas.messana@lw.com
- and -
George A. Davis
Andrew C. Ambruoso
Jonathan J. Weichselbaum
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
E-mail: george.davis@lw.com
andrew.ambruoso@lw.com
jon.weichselbaum@lw.com
- and -
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Michael R. Nestor
Kara Hammond Coyle
Betsy L. Feldman
Rodney Square
1000 North King Street
Wilmington, Delaware 19801
Telephone: (302) 571-6600
Facsimile: (302) 571-1253
E-mail: mnestor@ycst.com
kcoyle@ycst.com
bfeldman@ycst.com
About Global Eagle Entertainment
Headquartered in Los Angeles, Global Eagle Entertainment Inc. is a
provider of media, content, connectivity and data analytics to
markets across air, sea and land. It offers a fully integrated
suite of media content and connectivity solutions to airlines,
cruise lines, commercial ships, high-end yachts, ferries and land
locations worldwide. Visit http://www.GlobalEagle.com/for more
information.
Global Eagle Entertainment and its affiliates sought Chapter 11
protection (Bankr. D. Del. Lead Case No. 20-11835) on July 22,
2020. In the petition signed by CFO Christian M. Mezger, Global
Eagle disclosed $630.5 million in assets and $1.086 billion in
liabilities.
Judge John T. Dorsey oversees the cases.
Debtors have tapped Latham & Watkins LLP (CA) and Young Conaway
Stargatt & Taylor, LLP as legal counsel; Greenhill & Co., LLC as
investment banker; Alvarez & Marsal North America, LLC as financial
advisor; and PricewaterhouseCoopers LLP as tax advisor. Prime
Clerk, LLC is the claims and noticing agent.
The Office of the U.S. Trustee appointed a committee of unsecured
creditors on Aug. 5, 2020. The committee has tapped Akin Gump
Strauss Hauer & Feld LLP and Ashby & Geddes, P.A. as its legal
counsel, and Perella Weinberg Partners LP as its investment banker.
GLOBAL PACIFIC: Case Summary & 5 Unsecured Creditors
----------------------------------------------------
Debtor: Global Pacific Management, LLC
500 La Terraza Blvd.
Escondido, CA 92025-3875
Business Description: Global Pacific Management is the fee simple
owner of a single family residence located
at 30425 La Presa Loop, Temecula, CA having
a current value of $1.1 million.
Chapter 11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Central District of California
Case No.: 21-10556
Judge: Hon. Wayne E. Johnson
Debtor's Counsel: J. Luke Hendrix, Esq.
LAW OFFICES OF J. LUKE HENDRIX
28693 Old Town Front St. Suite 400-D
Temecula, CA 92590
Tel: (951) 221-3721
Email: luke@jlhlawoffices.com
Total Assets: $1,100,198
Total Liabilities: $2,184,144
The petition was signed by Jon Cenoz, sole member/officer.
A copy of the Debtor's list of five unsecured creditors is
available for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/7TJTJBY/Global_Pacific_Management_LLC__cacbke-21-10556__0002.0.pdf?mcid=tGE4TAMA
A copy of the petition is available for free at PacerMonitor.com
at:
https://www.pacermonitor.com/view/RAWCUZY/Global_Pacific_Management_LLC__cacbke-21-10556__0001.0.pdf?mcid=tGE4TAMA
GORDON BROTHERS: Affiliate Wins Cash Collateral Access Thru Feb 28
------------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Washington
has entered a stipulated order that amended a prior order
approving the emergency and interim use of cash collateral by
Kamiak Vineyards Inc., an affiliate of Gordon Brothers Cellars.
Kamiak may use cash collateral in accordance with a budget, with a
10% variance.
Based on the parties' agreement, Kamiak is authorized to use cash
collateral on an emergency and interim basis through February 28,
2021, subject to the terms and conditions of the Order, the Initial
Cash Collateral Order, and the Second Interim Order, unless further
extended by Court order.
Any party with a lien or garnishment impacting Kamiak's ability to
utilize Cash Collateral is directed to promptly take action as is
necessary to ensure that Cash Collateral is turned over to or
released to Kamiak, except as otherwise ordered by the Court.
As adequate protection, for any party holding a valid, perfected,
unavoidable prepetition security interest or lien against the Cash
Collateral, to the extent there is a diminution in value of that
party's collateral, the party is granted a valid, automatically
perfected replacement lien against any post-petition property of
Kamiak of the same type and category in which the party held
prepetition liens, with the same priority as its prepetition liens
had in Kamiak's property, as well as replacement liens in any
assets for the full amount of the Cash Collateral which is utilized
pursuant to the Stipulated Order.
Kamiak will also make a monthly adequate protection payment to the
Bank of Eastern Washington in the amount of $15,000, which payment
will be due on the 15th day of each month.
The Order constitutes a security agreement under the applicable
provisions of the Uniform Commercial Code in effect in states where
Kamiak (a) is domiciled, (b) operates its business, and (c)
maintains its principal place of business. The replacement liens
granted are valid, perfected and enforceable security interests and
liens on the property of Kamiak and Kamiak's estate without further
filing or recording of any document or instrument or any other
action, but only to the extent of the enforceability of the Bank of
Eastern Washington's security interests in the prepetition
collateral.
The court will hold a hearing on February 24 at 10 a.m. to consider
Kamiak's use of cash collateral on a final basis.
A copy of the Stipulated Order and the Debtor's 2020 operating
budget is available for free at https://bit.ly/36BPJDm from
PacerMonitor.com.
About Gordon Brothers Cellars, Inc.
Gordon Brothers Cellars, Inc. owns and operates a wine business.
Gordon Brothers Cellars sought protection under Chapter 11 of the
U.S. Bankruptcy Code (Bankr. E.D. Wash. Case No. 20-02003) on
November 6, 2020. In the petition signed by Jeffrey J. Gordon,
president, the Debtor disclosed $447,844 in assets and $2,148,304
in liabilities.
Gordon Brothers Cellars' case is jointly administered with the
Chapter 11 case of Kamiak Vineyards Inc., which sought bankruptcy
protection (Bankr. E.D. Wash. Case No. 20-02038) on November 17,
2020. Gordon Brothers Cellars' is the lead case.
Judge Whitman L. Holt oversees the cases.
John W. O'Leary, Esq., at Gravis Law, PLLC, represents the Debtor.
Kevin O'Rourke is the Chapter 11 Subchapter V Trustee.
Jason Ayres, Esq., and Todd Reuter, Esq., at Foster Garvey P.C.,
represent Bank of Eastern Washington.
Michael Paukert, Esq., at Paukert & Troppmann, PLLC, represents
Equitable Financial Life Insurance Company.
GREAT WESTERN: Fitch Puts 'C' IDR on Watch Positive
---------------------------------------------------
Fitch Ratings has placed Great Western Petroleum, LLC's (or GWP)
'C' Issuer Default Rating (IDR) on Rating Watch Positive following
the company's announcement of a proposed second lien issuance to
refinance near-term maturities.
In addition, Fitch has placed GWP's 'CCC'/'RR1' senior secured
credit facility and senior unsecured notes on Rating Watch
Positive. The senior secured facility is rated 'CCC'/'RR1' and the
unsecured notes are rated 'C'/'RR5'.
If the proposed transaction is completed, Fitch may upgrade the IDR
to 'CCC+' or 'B-'. The proposed second lien notes will be notched
to the IDR based on revised recovery assumptions with the proposed
capital structure, and the ratings on the unsecured notes would be
withdrawn.
Fitch views the proposed transaction as a credit positive as it
would eliminate near-term maturities, including a senior unsecured
note due in September 2021 and the springing of the revolver
maturity to March 2021. If the transaction is successful, GWP would
not have a bond maturity due until 2026. Operations have stabilized
since the onset of the pandemic, and Fitch expects the company to
be FCF neutral to slightly positive in 2021.
GWP also announced that preferred unit holders agreed to exchange
their preferred units of new common units. In addition, the Group
would make a new equity investment in the company. The transaction
would result in the elimination of annual preferred distributions
of approximately $23.7 million. The recapitalization of the
preferred and common units is contingent upon the refinancing in
full of GWP's existing senior notes due 2021.
GWP has shown an ability to operate under the new regulatory
environment in Colorado with no material impact on operations and
an ability to receive permits under the new guidelines. Fitch does
not believe the new regulatory environment will impact operations,
the overhang of potentially further regulatory initiatives could
continue to hamper debt capital market access.
KEY RATING DRIVERS
Proposed Second Lien Offering: Great Western plans to issue $275
million of five-year senior secured second lien notes due 2026,
with proceeds to be used to repay the 2021 senior notes and to fund
a partial paydown of the revolver. In addition, holders of the $75
million in 8.5% senior unsecured notes due 2025 have agreed to
exchange into the same senior secured second lien notes due 2026.
The transaction would address near-term debt maturities and
eliminate all bond maturities until 2026. The proposed exchange of
the preferred units into common units would reduce debt (Fitch
assigns a 50% equity credit) and reduce annual cash outflows in the
form of distributions of approximately $23.7 million. Pro forma for
the transaction, the company would have approximately 58% of its
revolver availability drawn. However, liquidity is supported by
approximately $212 million of cash and revolver availability and
Fitch's estimates that GWP will generate neutral to slightly
positive FCF.
The proposed transaction follows a failed attempt by Great Western
to complete a debt exchange that Fitch determined was a distressed
debt exchange. The exchange was to address the company's senior
unsecured notes due on Sept. 30, 2021, and the springing of the
revolver maturity to March 30, 2021 if the unsecured notes are not
refinanced in full. Although Fitch believes GWP's credit metrics,
liquidity, and operations are intact, and that the lack of access
to debt capital markets for most single-B energy issuers prohibited
the company from addressing its near-term debt maturities.
Pandemic Impact on Credit: The impact of the pandemic has led to
elevated credit metrics due to lower commodity prices and reduced
production guidance. Fitch expects debt/EBITDA to increase to 3.1x
in 2021 from 2.5x in 2020 based on its current price deck
assumption of $42 in 2021, although current spot prices are
materially higher (above $50). In addition, although Fitch
considers liquidity as adequate, current utilization of the
revolver limits headroom if commodity prices take another severe
downturn.
Potential levers to enhance credit quality will come from the
application of FCF to reduce debt, potential conversion of the
preferred stock, stability in commodity prices at current levels,
and a more favorable regulatory outlook.
Pivot to FCF: Fitch believes the company is on the path to generate
positive FCF in 2021 and beyond based on the current price deck.
Although Fitch does not expect a material reduction in debt from
the application of FCF proceeds, GWP should realize enhanced
liquidity and be in a better position to extend its revolver
maturity. Positive FCF is expected to be driven by improved
commodity pricing protected by a solid hedging program, narrowing
differentials, and lower operating and capital costs.
Regulatory Environment Overhang: Senate Bill 19-181 was signed into
law on April 16, 2019, and the rules to align the regulations with
the bill were approved by the Colorado Oil and Gas Conservation
Commission (COGCC) on Nov. 23, 2020. The new rules go into effect
on Jan. 15, 2021. The regulations include a minimum 2,000 feet
setback for schools or childcare centers, a prohibition on routine
flaring or venting, and increased protections for wildlife.
Fitch does not foresee near-to-medium term operational risks under
the new regulatory environment. GWP was able to get approval for
107 wellbore permits over the past six months that meet new
regulations. However, the regulatory and political environment may
remain an overhang, especially as it relates to capital market
access.
ESG Considerations:
Great Western has an Environmental, Social and Governance (ESG)
Relevance Score of '4' for Exposure to Social Impacts, due to
heightened regulatory pressure for Colorado oil and gas operators,
which may have a longer-term impact on costs and inventory. Fitch
believes this has a negative impact on the credit profile and is
relevant to the rating in conjunction with other factors.
KEY ASSUMPTIONS
KEY RECOVERY RATING ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- West Texas Intermediate (WTI) oil prices of $42/bbl in 2021,
$47/bbl in 2022 and $50/bbl in 2023.
-- Henry Hub natural gas prices of $2.45 per thousand cubic feet
(mcf) throughout the forecasted period.
-- Realized prices in accordance with Accounting Standards
Codification (ASC) 606 (gathering and transportation [G&T]
costs netted).
-- Minimal production growth in 2020 and low single-digit
production growth in 2021.
-- A capital program linked to lower activity in 2020, with
price-linked increases in the outer years.
-- Flat unit costs through the forecasts.
Key Recovery Rating Assumptions
-- The recovery analysis assumes that Great Western Petroleum LLC
would be reorganized as a going-concern in bankruptcy rather
than liquidated.
-- Fitch has assumed a 10% administrative claim.
Going-Concern (GC) Approach
Fitch assumes a bankruptcy scenario exit EBITDA of $215 million, in
line with the 2022 stress case EBITDA. The EBITDA estimate assumes
a slight uptick in oil and natural gas prices following a prolonged
commodity price downturn ($25-$35/bbl oil) coupled with an
unexpected regulatory change, causing lower-than-expected
production, less economic drilling inventory and liquidity
constraints.
Fitch uses a GC enterprise value (EV) multiple of 3.0x versus a
historical energy and production (E&P) energy subsector exit
multiple of 5.6x. The lower multiple reflects Great Western's
footprint in the DJ Basin, which is smaller, subject to increased
regulatory risks and cored up, leading to fewer available assets to
increase reserves and inventory.
Fitch's going-concern assumptions lead to a valuation of $645
million, a decrease since the last review due to a smaller
production size and lower realized pricing.
Liquidation Approach
Fitch uses transactional and asset-based valuations, such as recent
transactions for the DJ Basin, on $/acre, $/drilling location,
$/flowing barrel and $/proved reserve estimates to determine a
reasonable sales price for the company's assets.
Fitch used PDC Energy Inc.'s acquisition of SRC Energy, Inc. in
August 2019 as the key comparison. Fitch notes that SRC's acreage
position is slightly south and east of the company's Weld County
position, which has different valuation impacts than the company's
Adams County core, which is in the volatile oil window.
Fitch's liquidation value was $625 million.
Fitch assumes the revolver was drawn at $485 million, or 100% of
the elected commitment amount. The allocation of value in the
liability waterfall results in a recovery corresponding to an 'RR1'
rating for the revolver and an 'RR5' rating for the senior
unsecured notes.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Successful completion of the proposed transaction.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The ratings will remain at 'C' to reflect the increased
default risk of not addressing the springing maturity on the
revolver (March 2021) and the potential of a distressed debt
exchange.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
ESG Considerations:
Great Western has an Environmental, Social and Governance (ESG)
Relevance Score of '4' for Exposure to Social Impacts, due to
heightened regulatory pressure for Colorado oil and gas operators,
which may have a longer-term impact on costs and inventory. Fitch
believes this has a negative impact on the credit profile and is
relevant to the rating in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
GROW CAPITAL: Reports $1-Mil. Net Loss for Quarter Ended Sept. 30
-----------------------------------------------------------------
Grow Capital, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $1 million on $4.66 million of total revenues for the three
months ended Sept. 30, 2020, compared to a net loss of $248,893 on
$598,662 of total revenues for the same period last year.
As of Sept. 30, 2020, the Company had $5.06 million in total
assets, $14.25 million in total liabilities, and a total
stockholders' and members' deficit of $9.19 million.
As of Sept. 30, 2020, the Company had total current assets of
$2,060,955 and negative working capital of $1,612,666 compared to
total current assets of $726,321 and negative working capital of
$317,792 as of June 30, 2020. The decrease in the Company's
working capital was primarily a result of an increase to current
accrued liabilities in relation to commissions payable by combined
entity Appreciation Financial LLC and the accrual of certain
anticipated legal settlement amounts.
The Company had a working capital deficit of $1,612,666 with
approximately $1,495,517 of cash on hand as of Sept. 30, 2020.
Cash provided by operations totaled $300,908 during the three
months ended Sept. 30, 2020. The Company continues to work
actively to increase its customer/client base and increase gross
profit in Bombshell Technologies and PERA LLC, in order to achieve
net profitability by the close of fiscal 2021. For any operational
shortfalls, the Company intends to rely on sales of its
unregistered common stock, loans and advances until such time as we
achieve profitable operations. In addition, the current
presentation is based on the fact that the Company is currently in
negotiations to acquire Appreciation Financial LLC and its related
entities. Should that not occur, it is possible that the Company
will no longer combine its results with those of Appreciation
Financial LLC and its related entities.
Grow Capital said, "If the Company fails to generate positive cash
flow or obtain additional financing, when required and on
acceptable terms, the Company may have to modify, delay, or abandon
some or all of its business and expansion plans, and potentially
cease operations altogether. Consequently, the aforementioned
items raise substantial doubt about the Company's ability to
continue as a going concern within one year after the date that the
financial statements are issued. The accompanying consolidated
financial statements do not include any adjustments that might be
necessary should we be unable to continue as a going concern."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/Archives/edgar/data/1448558/000159406221000009/form10q.htm
About Grow Capital
Grow Capital (f/k/a Grown Condos, Inc.) --
http://www.growcapitalinc.com-- was a call center that contracted
out as a customer contact center for a variety of business clients
throughout the United States. Over time its main business became a
third-party verification service. While continuing to operate as a
call center, in 2008 the Company expanded its business plan to
include the development of a social networking site called
JabberMonkey (Jabbermonkey.com) and the development of a location
based social networking application for smart phones called
Fanatic Fans.
Grow Capital reported a net loss of $2.35 million for the year
ended June 30, 2020, compared to a net loss of $2.33 million for
the year ended June 30, 2019. As of June 30, 2020, the Company had
$1.91 million in total assets, $1.92 million in total liabilities,
and a total stockholders' deficit of $8,045.
L J Soldinger Associates, LLC, in Deer Park, Illinois, the
Company's auditor since 2017, issued a "going concern"
qualification in its report dated Oct. 13, 2020, citing that the
Company's significant operating losses raise substantial doubt
about its ability to continue as a going concern.
GULFPORT ENERGY: Litigation Claimants Oppose Plan Releases
----------------------------------------------------------
Various litigation claimants (the "Claimants") object to the
Disclosure Statement Relating to the Joint Chapter 11 Plan of
Reorganization of Gulfport Energy Corporation and Its Debtor
Subsidiaries.
The Claimants currently consist of approximately 152 different
individuals and entities asserting various prepetition and
postpetition claims in multiple lawsuits against the Debtors.
Based on prepetition claims, the Claimants have filed proofs of
claim totaling over approximately $477 million, and will be seeking
approval of a class proof of claim for over $1.75 billion.
The Claimants point out that the Disclosure Statement completely
lacks any description or specific reference to the Claimants'
lawsuits or claims or the potential consequences on the Debtors'
future operations. Without complete disclosure and transparency for
all voting creditors regarding the Claimants, their past and
present claims, and the unsustainability of the Debtors' business
practices, the Disclosure Statement is materially incomplete.
The Claimants assert that the Disclosure Statement provides no
reference to insurance coverage for litigation claimants, and thus
the disclosure is wholly insufficient concerning the ability of a
party that may prevail from being able to recover insurance
proceeds from the Debtors' policies.
The Claimants further assert that the Plan proposed by the Debtors,
and described in the Disclosure Statement, contains opt out
third-party releases. Given the class proof of claim and the
potential class action in the Debtors' cases, the Plan contains
impermissible releases that make the Plan unconfirmable.
The Claimants state that based on the unlawful nature of the
Debtors' prepetition operations and the Debtors' apparent
indication to continue operations, the Plan does not meet Section
1129(a)(3) as it is not proposed in good faith and proposes
continuing operations that are forbidden by applicable state law.
Attorneys for Claimants:
Joshua N. Eppich
J. Robertson Clarke
BONDS ELLIS EPPICH SCHAFER JONES LLP
420 Throckmorton Street, Suite 1000
Fort Worth, Texas 76102
Tel: (817) 405-6900
Fax: (817) 405-6902
E-mail: joshua@bondsellis.com
E-mail: robbie.clarke@bondsellis.com
- and -
Craig J. Wilson
C.J. Wilson Law, LLC
P.O. Box 2879
Westerville, OH 43086
Tel: (614) 723-9050
E-mail: craig@cjwilsonlaw.com
- and -
Brian J. Warner
Shuman, McCuskey & Slicer PLLC
1445 Stewartstown Road, Suite 200
Morgantown, WV 26508
Tel: (304) 291-2702
E-mail: bwarner@shumanlaw.com
Prearranged Plan
The Debtors filed a Joint Chapter 11 Plan of Reorganization and a
Disclosure Statement on Nov. 24, 2020.
Following productive, arm's-length negotiations, on Nov. 13, 2020,
the Debtors, the RBL Lenders, and the Ad Hoc Group entered into the
Restructuring Support Agreement. The restructuring transactions
agreed upon in the RSA will be implemented through the Debtors'
prearranged Plan, which benefits from overwhelming support from the
Debtors' funded debt holders and will result in a material
deleveraging and a new money equity rights offering backstopped by
the Ad Hoc Group.
Under the terms of the Restructuring Support Agreement, which are
embodied in the Plan, the RBL Lenders and the Ad Hoc Group have
agreed to facilitate a balance sheet restructuring that will reduce
debt by approximately $1.25 billion, reduce the Debtors' high fixed
operational costs, and provide the Debtors with $580 million in
exit financing.
As of the date of this Disclosure Statement, the Debtors have
approximately $2.50 billion (principal and accrued interest) of
funded debt, consisting of:
* a superpriority revolving credit facility (the "DIP Facility")
in an aggregate principal amount of $262.5 million, of which $90
million is currently drawn;
* a senior secured revolving credit facility (the "RBL Credit
Facility") with a borrowing base of $580 million, an elected
commitment amount of $580 million, $355.5 million in borrowings
outstanding, and $243.7 million in outstanding letters of credit,
as of the Petition Date;
* a Headquarters Mortgage with approximately $22 million
outstanding; and
* unsecured notes, comprised of the 6.625% senior notes due 2023
in an aggregate principal amount of $350 million, the 6.000% senior
notes due 2024 in an aggregate principal amount of $650 million,
the 6.375% senior notes due 2025 in an aggregate principal amount
of $600 million; and the 6.375% senior notes due 2026 in an
aggregate principal amount of $450 million.
The principal terms of the Plan, as agreed under the RSA, include:
* DIP and Exit Financing. The RBL Lenders, with the Bank of
Nova Scotia as administrative agent (the "DIP Agent"), will provide
a $262.5 million DIP financing facility (the "DIP Facility"), that
will "roll up" a portion of the existing RBL Credit Facility and
provide sufficient liquidity for the Debtors to operate while in
chapter 11. The RBL Lenders have agreed that the RBL Credit
Facility and DIP Facility will convert into an exit financing
facility (the "Exit Facility") upon the effective date of the Plan
subject to the terms and conditions set forth in the Exit Facility
Term Sheet (as defined in the RSA).
* New Money Equity Rights Offering. The Ad Hoc Group has agreed
to backstop a new money rights offering of at least $50 million
(the "Rights Offering"), in exchange for New Preferred Stock.
* Treatment of Unsecured Claims. The holders of unsecured
claims against the Debtors (including bondholder claims, rejection
damages claims, and litigation claims) will receive 100% of the
equity of the Reorganized Debtors (prior to the Rights Offering)
and $550 million of new Unsecured Notes. The precise recovery for
each claim will depend on whether the applicable holder's claim is
against GPOR or one of its subsidiaries.
* Treatment of Existing Equity Interests. The existing equity
interests in GPOR will be canceled without any distribution
Each Holder of an Allowed General Unsecured Claim against Gulfport
Parent will receive, in full and final satisfaction of such Claim,
its pro-rata share of the Gulfport Parent Equity Pool; provided,
however, once the Holders of Notes Claims receive distributions of
94% of the New Common Stock (prior to and not including any
dilution by the Management Incentive Plan or any conversion of New
Preferred Stock into New Common Stock) in the aggregate on account
of their Notes Claims against all Debtors, the Holders of Notes
Claims shall waive any excess recovery on account of their Pro Rata
share of the Gulfport Parent Equity Pool until Holders of Allowed
General Unsecured Claims against Gulfport Parent have received New
Common Stock with a value sufficient to satisfy their Allowed
General Unsecured Claims against Gulfport Parent in full (based on
Plan Value).
Each Holder of an Allowed General Unsecured Claim against Gulfport
Subsidiaries shall receive, in full and final satisfaction of such
Claim, its pro-rata share of the: (i) Gulfport Subsidiaries Equity
Pool, (ii) Rights Offering Subscription Rights, and (iii) New
Unsecured Notes.
The Disclosure Statement still has blanks as to the total amount
and the estimated percentage recovery for general unsecured
claims.
A copy of the Disclosure Statement dated Nov. 24, 2020, is
available at the unofficial docket maintained by Epiq at
https://bit.ly/3cG4GrP
About Gulfport Energy Corp.
Gulfport Energy Corporation (NASDAQ: GPOR) --
http://www.gulfportenergy.com/-- is an independent natural gas and
oil company focused on the exploration and development of natural
gas and oil properties in North America and a producer of natural
gas in the contiguous United States. Headquartered in Oklahoma
City, Gulfport holds significant acreage positions in the Utica
Shale of Eastern Ohio and the SCOOP Woodford and SCOOP Springer
plays in Oklahoma. In addition, Gulfport holds non-core assets
that include an approximately 22% equity interest in Mammoth Energy
Services, Inc. (NASDAQ: TUSK) and has a position in the Alberta Oil
Sands in Canada through its 25% interest in Grizzly Oil Sands ULC.
As of Sept. 30, 2020, Gulfport had $2,375,559,000 in assets and
$2,520,336,000 in liabilities.
Gulfport and its subsidiaries sought Chapter 11 protection (Bankr.
S.D. Tex. Lead Case No. 20-35562) on Nov. 13, 2020.
The Hon. David R. Jones is the case judge.
The Debtors tapped Kirkland & Ellis LLP as their bankruptcy
counsel; Jackson Walker L.L.P. as local bankruptcy counsel; Alvarez
& Marsal North America, LLC as restructuring advisor; and Perella
Weinberg Partners L.P. and Tudor, Pickering, Holt & Co. as
financial advisor; and PricewaterhouseCoopers LLP as tax services
provider. Epiq Corporate Restructuring LLC is the claims agent.
The Office of the U.S. Trustee appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on Nov. 27,
2020. The committee tapped Norton Rose Fulbright US, LLP and
Kramer Levin Naftalis & Frankel, LLP as its legal counsel, and
Conway MacKenzie, LLC, as its financial advisor.
Wachtell, Lipton, Rosen & Katz is counsel for the special committee
of Gulfport's Board of Directors while Chilmark Partners is the
financial advisor.
Katten Muchin Rosenman LLP is counsel for the special committee of
the governing body of each Debtor other than Gulfport while M III
Partners, LP, is the financial advisor.
GULFPORT ENERGY: Rover Pipeline Says Disclosures Deficient
----------------------------------------------------------
Rover Pipeline LLC objects to the disclosure statement in support
of the joint chapter 11 plan, and motion to establish solicitation
procedures filed by Gulfport Energy Corporation and its
debtor-affiliates.
Rover asserts that the Disclosure Statement fails to provide
information necessary for Class 4 General Unsecured Claims to make
an informed decision when voting on the Plan. In its current form,
the Disclosure Statement is both facially and substantively
deficient with respect to critical Plan-related issues, and thus
fails to satisfy the basic disclosure requirements of 11 U.S.C.
Sec. 1125(a).
Rover claims that the Disclosure Statement contains only a brief
procedural history of the issues and provides no specific
disclosure regarding the current status of the disputes, or the
effect rejection would have on the Reorganized Debtors, their
ongoing operations, or the distribution to Class 4A General
Unsecured Claims against Gulfport.
Rover points out that the Debtors prepared the Liquidation Analysis
on a fully consolidated basis, despite acknowledging that the
Debtors' hypothetical liquidation would be on a nonconsolidated
basis.
Rover states that the solicitation procedures proposed in the
Solicitation Procedures Motion are not viable in light of the
agreed continuance of the Disclosure Statement hearing, and revised
solicitation procedures were not filed as of the filing of this
Objection.
Counsel for Rover:
KATTEN MUCHIN ROSENMAN LLP
John E. Mitchell, Esq.
Michaela Crocker
Yelena Archiyan
2121 N. Pearl St., Suite 1100
Dallas, TX 75201
Telephone: (469) 627-7017
E-mail: john.mitchell@katten.com
E-mail: michaela.crocker@katten.com
E-mail: yelena.archiyan@katten.com
- and -
HUNTON ANDREWS KURTH LLP
Shemin V. Proctor
Neil Kelly
600 Travis Street
Suite 4200
Houston, TX 77002
Telephone: (713) 220-4379
Facsimile: (713) 220-4285
E-mail: sproctor@HuntonAK.com
neilkelly@HuntonAK.com
Prearranged Plan
The Debtors filed a Joint Chapter 11 Plan of Reorganization and a
Disclosure Statement on Nov. 24, 2020.
Following productive, arm's-length negotiations, on Nov. 13, 2020,
the Debtors, the RBL Lenders, and the Ad Hoc Group entered into the
Restructuring Support Agreement. The restructuring transactions
agreed upon in the RSA will be implemented through the Debtors'
prearranged Plan, which benefits from overwhelming support from the
Debtors' funded debt holders and will result in a material
deleveraging and a new money equity rights offering backstopped by
the Ad Hoc Group.
Under the terms of the Restructuring Support Agreement, which are
embodied in the Plan, the RBL Lenders and the Ad Hoc Group have
agreed to facilitate a balance sheet restructuring that will reduce
debt by approximately $1.25 billion, reduce the Debtors' high fixed
operational costs, and provide the Debtors with $580 million in
exit financing.
As of the date of this Disclosure Statement, the Debtors have
approximately $2.50 billion (principal and accrued interest) of
funded debt, consisting of:
* a superpriority revolving credit facility (the "DIP Facility")
in an aggregate principal amount of $262.5 million, of which $90
million is currently drawn;
* a senior secured revolving credit facility (the "RBL Credit
Facility") with a borrowing base of $580 million, an elected
commitment amount of $580 million, $355.5 million in borrowings
outstanding, and $243.7 million in outstanding letters of credit,
as of the Petition Date;
* a Headquarters Mortgage with approximately $22 million
outstanding; and
* unsecured notes, comprised of the 6.625% senior notes due 2023
in an aggregate principal amount of $350 million, the 6.000% senior
notes due 2024 in an aggregate principal amount of $650 million,
the 6.375% senior notes due 2025 in an aggregate principal amount
of $600 million; and the 6.375% senior notes due 2026 in an
aggregate principal amount of $450 million.
The principal terms of the Plan, as agreed under the RSA, include:
* DIP and Exit Financing. The RBL Lenders, with the Bank of
Nova Scotia as administrative agent (the "DIP Agent"), will provide
a $262.5 million DIP financing facility (the "DIP Facility"), that
will "roll up" a portion of the existing RBL Credit Facility and
provide sufficient liquidity for the Debtors to operate while in
chapter 11. The RBL Lenders have agreed that the RBL Credit
Facility and DIP Facility will convert into an exit financing
facility (the "Exit Facility") upon the effective date of the Plan
subject to the terms and conditions set forth in the Exit Facility
Term Sheet (as defined in the RSA).
* New Money Equity Rights Offering. The Ad Hoc Group has agreed
to backstop a new money rights offering of at least $50 million
(the "Rights Offering"), in exchange for New Preferred Stock.
* Treatment of Unsecured Claims. The holders of unsecured
claims against the Debtors (including bondholder claims, rejection
damages claims, and litigation claims) will receive 100% of the
equity of the Reorganized Debtors (prior to the Rights Offering)
and $550 million of new Unsecured Notes. The precise recovery for
each claim will depend on whether the applicable holder's claim is
against GPOR or one of its subsidiaries.
* Treatment of Existing Equity Interests. The existing equity
interests in GPOR will be canceled without any distribution
Each Holder of an Allowed General Unsecured Claim against Gulfport
Parent will receive, in full and final satisfaction of such Claim,
its pro rata share of the Gulfport Parent Equity Pool; provided,
however, once the Holders of Notes Claims receive distributions of
94% of the New Common Stock (prior to and not including any
dilution by the Management Incentive Plan or any conversion of New
Preferred Stock into New Common Stock) in the aggregate on account
of their Notes Claims against all Debtors, the Holders of Notes
Claims shall waive any excess recovery on account of their Pro Rata
share of the Gulfport Parent Equity Pool until Holders of Allowed
General Unsecured Claims against Gulfport Parent have received New
Common Stock with a value sufficient to satisfy their Allowed
General Unsecured Claims against Gulfport Parent in full (based on
Plan Value).
Each Holder of an Allowed General Unsecured Claim against Gulfport
Subsidiaries shall receive, in full and final satisfaction of such
Claim, its pro-rata share of the: (i) Gulfport Subsidiaries Equity
Pool, (ii) Rights Offering Subscription Rights, and (iii) New
Unsecured Notes.
The Disclosure Statement still has blanks as to the total amount
and the estimated percentage recovery for general unsecured
claims.
A copy of the Disclosure Statement dated Nov. 24, 2020, is
available at the unofficial docket maintained by Epiq at
https://bit.ly/3cG4GrP
About Gulfport Energy Corp.
Gulfport Energy Corporation (NASDAQ: GPOR) --
http://www.gulfportenergy.com/-- is an independent natural gas and
oil company focused on the exploration and development of natural
gas and oil properties in North America and a producer of natural
gas in the contiguous United States. Headquartered in Oklahoma
City, Gulfport holds significant acreage positions in the Utica
Shale of Eastern Ohio and the SCOOP Woodford and SCOOP Springer
plays in Oklahoma. In addition, Gulfport holds non-core assets that
include an approximately 22% equity interest in Mammoth Energy
Services, Inc. (NASDAQ: TUSK) and has a position in the Alberta Oil
Sands in Canada through its 25% interest in Grizzly Oil Sands ULC.
As of Sept. 30, 2020, Gulfport had $2,375,559,000 in assets and
$2,520,336,000 in liabilities.
Gulfport and its subsidiaries sought Chapter 11 protection (Bankr.
S.D. Tex. Lead Case No. 20-35562) on Nov. 13, 2020.
The Hon. David R. Jones is the case judge.
The Debtors tapped Kirkland & Ellis LLP as their bankruptcy
counsel; Jackson Walker L.L.P. as local bankruptcy counsel; Alvarez
& Marsal North America, LLC as restructuring advisor; and Perella
Weinberg Partners L.P. and Tudor, Pickering, Holt & Co. as
financial advisor; and PricewaterhouseCoopers LLP as tax services
provider. Epiq Corporate Restructuring LLC is the claims agent.
The Office of the U.S. Trustee appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on Nov. 27,
2020. The committee tapped Norton Rose Fulbright US, LLP and
Kramer Levin Naftalis & Frankel, LLP as its legal counsel, and
Conway MacKenzie, LLC, as its financial advisor.
Wachtell, Lipton, Rosen & Katz is counsel for the special committee
of Gulfport's Board of Directors while Chilmark Partners is the
financial advisor.
Katten Muchin Rosenman LLP is counsel for the special committee of
the governing body of each Debtor other than Gulfport while M III
Partners, LP is the financial advisor.
INNOVATIVE DESIGNS: Delays Filing of Fiscal 2020 Annual Report
--------------------------------------------------------------
Innovative Designs, Inc. filed a Form 12b-25 with the Securities
and Exchange Commission notifying the delay in the filing of its
Annual Report on Form 10-K for the period ended Oct. 31, 2020.
The Company said its outside auditors have not completed their work
in connection with compiling the financial information that is a
part of the Form 10-K. It is expected that the work will be
completed within the extended filing period.
The Company expects to report decreased revenues from $215,975 for
the fiscal year ended Oct. 31, 2019, to approximately $187,069 for
the fiscal year ended Oct. 31, 2020.
About Innovative Designs
Headquartered in Pittsburgh, Pennsylvania, Innovative Designs, Inc.
operates in two separate business segments: cold weather clothing
and a house wrap for the building construction industry. Both of
its segment lines use products made from INSULTEX, which is a
low-density foamed polyethylene with buoyancy, scent block, and
thermal resistant properties. The Company has a license agreement
directly with the owner of the INSULTEX Technology.
Innovative Designs recorded a net loss of $841,979 for the year
ended Oct. 31, 2019, compared to a net loss of $582,882 for the
year ended Oct. 31, 2018. As of July 31, 2020, the Company had
$1.56 million in total assets, $753,155 in total liabilities, and
$811,956 in total stockholders' equity.
Louis Plung & Company, LLP, in Pittsburgh, Pennsylvania, the
Company's auditor since 2006, issued a "going concern"
qualification in its report dated March 16, 2020 citing that the
Company has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability
to continue as a going concern. The auditor further stated that,
"In early 2020, an outbreak of a novel strain of coronavirus was
identified and infections have been found in a number of countries
around the world, including the United States. The coronavirus and
its impact on trade including customer demand, travel, employee
productivity, supply chain, and other economic activities has had,
and may continue to have, a significant effect on financial markets
and business activity. The extent of the impact of the coronavirus
on our operational and financial performance is currently uncertain
and cannot be predicted."
JADEX INC: Moody's Rates New $450MM First Lien Loan 'B2'
--------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Jadex Inc.'s
proposed $450 million senior secured first lien term loan due
February 2028. Moody's also affirmed the B2 Corporate Family Rating
and B2-PD Probability of Default Rating. The B2 ratings on the
company's existing $50 million senior secured revolving credit
facility expiring May 2024 and $355 million senior secured first
lien term loan due May 2026 were affirmed. The rating on the $355
million senior secured first lien term loan due May 2026 will be
withdrawn at the close of the transaction, but the $50 million
senior secured revolving credit facility expiring May 2024 will
remain outstanding. The outlook is stable. The proceeds from the
new term loan will be used to pay down the existing term loan and
pay a $100 million dividend to the sponsor.
The affirmation of the CFR despite the increase in debt reflects
Moody's expectation of a significant increase in EBITDA over the
next 12 months, little increase in total projected interest expense
from the new debt and management's pledge to dedicate free cash
flow to debt reduction over the next 12 to 18 months. Moody's
expects Jadex's debt to LTM EBITDA to improve in 2021 from new
business and completed and ongoing productivity initiatives. The
proposed new term loans are expected to have a significantly lower
interest rate resulting in no increase in total Interest expense.
While free cash flow is also expected to improve as one time
charges abate, Moody's expects it to remain constrained by
continued capex spending to fund new business and further
productivity initiatives. Moody's projects debt to LTM EBITDA to be
4.9x and free cash flow to debt to be over 1.0% by the end of 2021
versus 6.3x and -24.3% as of September 30, 2020, respectively, pro
forma for the proposed refinancing and debt financed dividend.
Jadex was carved out from Newell Brands Inc. (Ba1 negative) in May
2019.
The B2 ratings on the revolver and 1st lien term loan, the same as
the Corporate Family Rating, reflect the benefit of guarantees and
security from the wholly owned domestic subsidiaries and their
standing as the preponderance of debt in the capital structure. The
co-borrowers are Jadex Inc. and Zinc Holdings, Inc. The facility is
guaranteed by the wholly owned domestic subsidiaries and the parent
company, Zinc-Polymer Parent Holdings, LLC (issuer of the financial
statements). Security includes a first priority lien on
substantially all of the personal property and real property of the
guarantors, subject to certain exceptions.
The stable outlook reflects Moody's expectation that Jadex will
effectively commercialize its new business, benefit from
productivity initiatives and dedicate free cash flow to debt
reduction.
The proposed new senior secured term loan is expected to contain
the same covenant flexibility for transactions that can adversely
affect creditors as the existing term loan. This includes an
ability to incur incremental indebtedness up to the greater of
$36.5m and 50% of pro forma adjusted EBITDA plus additional amounts
so long as pro forma: first lien net leverage ratio does not exceed
3.7x (for pari passu indebtedness); total net leverage ratio does
not exceed 4.7x (for junior secured indebtedness); and either (i)
total net leverage ratio does not exceed 4.7x, or (ii) interest
coverage is not less than 2.0x (for unsecured indebtedness).
Alternatively, the ratio tests can all be satisfied so long as
leverage does not increase or interest coverage does not decrease
on a pro forma basis if incurred in connection with a permitted
acquisition or investment. The credit facilities are also expected
to include: provisions allowing the transfer of assets to
unrestricted subsidiaries subject to a blocker provision limiting
the transfer of Intellectual Property that is material to the
business taken as a whole. Only wholly-owned subsidiaries are
expected to provide guarantees, and guarantees may be released if
subsidiary guarantors cease to be wholly-owned; partial dividends
of ownership interests could jeopardize guarantees. Jadex's
obligation to prepay loans with the net proceeds of asset sales is
not expected to have step-downs.
Assignments:
Issuer: Jadex Inc.
Gtd Senior Secured First Lien Term Loan, Assigned B2 (LGD3)
Affirmations:
Issuer: Jadex Inc.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Gtd Senior Secured First Lien Term Loan, Affirmed B2 (LGD3)
Gtd Senior Secured First Lien Revolving Credit Facility, Affirmed
B2 (LGD3)
Outlook Actions:
Issuer: Jadex Inc.
Outlook, Remains Stable
The ratings are subject to the receipt and review of the final
documentation.
RATINGS RATIONALE
Weaknesses in Jadex's credit profile include a high customer and
product concentration of sales, lack of scale (revenue) and low
EBITDA margin. Moreover, the company competes in the competitive
and fragmented packaging industry, which makes growth and margin
expansion difficult. The company generates 11% of sales from
cyclical industrial end markets including automotive. Jadex has a
high percentage of customers without long-term contracts, which
lowers switching costs. Governance risks are heightened given
Jadex's private equity ownership, which carries the risk of an
aggressive financial policy, which could include debt funded
acquisitions or dividends. All of the members of the board of
directors are affiliated with One Rock Capital Partners, LLC.
Strengths in Jadex's credit profile include its high exposure to
stable end markets and long-term relationships with blue-chip
customers. The company generates approximately 65% of sales from
medical, food and consumer end markets. Jadex has an average
relationship of over 20 years with its top customers which include
many blue chip names. The company is the sole supplier and has
exclusivity clauses on a significant percentage of business.
Jadex's adequate liquidity encompasses an expectation of weak free
cash flow over the next 12 months offset by adequate back up
liquidity from the $50 million revolver, which expires May 2024.
Moody's considers the revolver small in comparison to capex and
interest expense and as a percentage of total revenue. The only
financial covenant for the revolver is a springing first lien
leverage ratio of 6.5x which is triggered at 35% utilization. The
company is expected to maintain good cushion under this covenant
over the next 12 months. Jadex has some seasonality in 2Q and 3Q.
Term loan amortization is 1.0% annually ($4.5 million) paid
quarterly. Certain assets are not secured by the credit agreement
leaving some alternate liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if there is deterioration in the
credit metrics, liquidity or competitive environment. Specifically,
the ratings could be downgraded if:
Debt to EBITDA is above 6.0 times
EBITDA to interest expense is below 2.5 times
Free cash flow to debt is below 1.0%
An upgrade would require a sustainable improvement in credit
metrics within the context a stable competitive environment. Jadex
would also need to increase its scale (revenue) and diversity and
improve its liquidity, including an improvement in free cash flow.
Specifically, the ratings could be upgraded if:
Debt to EBITDA is below 5.0 times
EBITDA to interest expense is above 3.5 times
Free cash flow to debt to debt is above 4.0%
Headquartered in Greenville, SC, Jadex Inc. is a manufacturer of
rigid and flexible plastic packaging and zinc and steel-based
products. Jadex serves the food, medical, consumer, industrial,
infrastructure, coinage, and automotive end markets. 84% of sales
are generated in the US with the balance generated in the
Philippines, Canada, Mexico, United Kingdom, China, Germany, and
Italy. Jadex has been a portfolio company of One Rock Capital
Partners, LLC since May 2019 and does not publicly disclose
financial information. LTM sales as of September 30, 2020 were
approximately $651 million.
The principal methodology used in these ratings was Packaging
Manufacturers: Metal, Glass and Plastic Containers Methodology
published in September 2020.
KNOTEL INC: Chairman & Co-Founder Steps Down Days After Bankruptcy
------------------------------------------------------------------
Meghan Morris of Business Insider reports that Knotel's cofounder
and chairman Edward Shenderovich is stepping down during the
bankruptcy process. Mr. Shenderovich cofounded Knotel in 2015 and
was largely responsible for fundraising.
Knotel cofounder Edward Shenderovich is stepping back from his
position as chairman, he told staff in a Feb. 2, 2021 email
obtained by Insider.
Shenderovich indicated he plans to return to the flexible workspace
provider, which filed for Chapter 11 bankruptcy on Jan. 31, 2021.
Cofounder Amol Sarva, who has long served as CEO, "will wear both
hats for now," Mr. Shenderovich wrote.
"Just to be clear, I am not abandoning the ship -- I hope to be
back after the Chapter 11 process concludes. Just stepping out for
a while," he said, not indicating his short-term plans in the
email.
Other Shenderovich ventures include London-based Kite Ventures, a
venture capital firm he founded in 2008. The firm's 30-company
portfolio included Groupon, Delivery Hero, and Plated, per
Pitchbook. Shenderovich also founded two companies.
Shenderovich, a Russian-born entrepreneur, was largely responsible
for Knotel's fundraising, while Mr. Sarva served as the face of the
company and focused on operations.
Knotel said it raised $400 million in a Series C fundraising round
in August of 2019. Sarva implied a valuation of at least $1.3
billion at the time in a Bloomberg interview. Of that round, $250
million was set aside for buying buildings on behalf of lead
investor Wafra, an effort that never materialized, according to
sources with knowledge of the company's finances.
More recently, Knotel struggled to raise additional capital. Mr.
Sarva told staff in July he raised $10 million and sought to bring
in $100 million by the end of August, an effort that never
materialized. At the beginning of January, he said he secured
funding, which an insider said was a restructuring deal involving
debt and equity components.
Knotel, once one of the brightest and most valuable names in an
ascendant industry, has filed for Chapter 11 reorganization in U.S.
Bankruptcy Court in the District of Delaware.
For months, Knotel has been hit with dozens of lawsuits in several
states by landlords and creditors, who claim the firm owes millions
of dollars in unpaid rent and other debts, some of which precede
the pandemic. With mounting financial liabilities, the company had
been planning to dramatically scale back its business.
The company's deteriorating financial position appeared to quicken
in recent weeks. At least eight Manhattan landlords sued Knotel in
January on claims of unpaid rent at several locations, according to
court records. Last week, Knotel gave notice to a member that it
planned to vacate a workspace it operated at 200 West 41st Street,
according to a source with direct knowledge of those
communications, leaving that customer to scramble to retrieve their
belongings from the location before it was padlocked.
About Knotel Inc.
Knotel -- http://www.Knotel.com/-- is a flexible workspace
platform that matches, tailors, and manages space for customers.
New York-based Knotel offers workspace properties such as desks,
open, and private spaces on rent for companies in 20 global
markets. In the U.S., Knotel primarily serves in the New York City
and San Francisco areas.
Knotel, founded in 2015, raised hundreds of millions of dollars
from investors. It expanded rapidly for years and was one of the
more aggressive competitors in the co-working and flexible office
space sector, becoming one of WeWork's fiercest rivals.
As the COVID-19 pandemic upended the co-working industry, Knotel,
Inc., and its U.S. subsidiaries sought Chapter 11 protection
(Bankr. D. Del. Case No. 21-10146) on Jan. 30, 2021, to pursue a
sale of the assets to Newmark Group.
Knotel estimated $1 billion to $10 billion in assets and
liabilities as of the bankruptcy filing.
Morris, Nichols, Arsht & Tunnell LLP is serving as the Company's
counsel. Moelis & Company is the investment banker. Omni Agent
Solutions is the claims agent.
L'OCCITANE INC: Feb. 5 Deadline Set for Panel Questionnaires
------------------------------------------------------------
The United States Trustee is soliciting members for an unsecured
creditors committee in the bankruptcy case of L'Occitane, Inc.
If a party wishes to be considered for membership on any official
committee that is appointed, it must complete a questionnaire
available at https://bit.ly/3tq2Cdw and return it via email to
Tina.L.Oppelt@usdoj.gov at the Office of the United States Trustee
so that it is received no later than 1:00 p.m., on Friday, Feb. 5,
2021.
If the U.S. Trustee receives sufficient creditor interest in the
solicitation, it may schedule a meeting or telephone conference for
the purpose of forming a committee.
About L'Occitane Inc.
New York-based L'Occitane, Inc. -- http://www.loccitane.com/-- is
a national retail chain that sells and promotes the internationally
renowned "L'OCCITANE en Provence" beauty and well-being products
brand in the United States through boutiques in 36 states and its
website. After opening its first boutique in the U.S. in 1996, the
Company presently operates 166 boutiques in 36 states and Puerto
Rico.
Founded by Olivier Baussan more than 40 years ago,
Switzerland-based L'OCCITANE en Provence captures the true art de
vivre of Provence, offering a sensorial immersion in the natural
beauty and lifestyle of the South of France. From the texture of
L'OCCITANE products to the scent, each skincare, body care, and
fragrance formula promises pleasure through beauty and well-being
-- a moment rich in enjoyment and discovery that goes beyond
tangible benefits to create a different experience of Provence.
On Jan. 26, 2021, L'Occitane, Inc., filed a Chapter 11 petition
(Bankr. D.N.J. Case No. 21-10632). The Debtor estimated $100
million to $500 million in assets and liabilities as of the
bankruptcy filing. International operations are not part of the
Chapter 11 filing.
The Hon. Michael B. Kaplan is the case judge.
Fox Rothschild LLP is serving as the Company's legal counsel, RK
Consultants LLC is serving as financial advisor, and Hilco Real
Estate, LLC is serving as real estate advisor to the Company.
Stretto is the claims agent, maintaining the page
https://cases.stretto.com/LOccitane
LEON USA: 4 Restaurants File for Chapter 7 Bankruptcy
-----------------------------------------------------
Daniel J. Sernovitz reports that the Washington Business Journal
reports that the District-based arm of fast-casual Mediterranean
restaurant chain Leon has filed for bankruptcy, impacting notable
commercial real estate owners in the District and Northern Virginia
including Edens and Brookfield Properties.
Leon USA Inc. filed for Chapter 7 liquidation Tuesday, Feb. 2,
2021. A trio of its related limited liability companies,
representing locations at 655 New York Ave. NW, 1350 Eye St. NW,
and 2905 District Ave. in Mosaic District in Fairfax, also filed
separate Chapter 7 cases in the same bankruptcy court.
The chain, founded in London in 2004, planted its flag in D.C. with
an initial location at 1724 L St. NW and expanded with additional
locations, including at 655 New York Ave. NW, developed by Douglas
Development Corp. and Brookfield. Greg Meyer, executive vice
president for the D.C. region at Brookfield, said Leon saw a drop
in foot traffic generated by the area's mostly unoccupied office
buildings and a lack of events at nearby venues including the
Walter E. Washington Convention Center because of the Covid-19
pandemic.
"I love their concept, and we believe in their concept, but it
requires traffic, and right now, there's no traffic," Meyer said.
The LLC tied to its initial location at 1724 L St. NW reported 2020
revenue of about $418,000, down from $1.12 million in 2019. Its
location at 655 New York Ave. NW saw revenue of about $120,320 last
year, down from $246,948 in 2019. Not all of its locations reported
drops, however. The LLC it created for its restaurant at 1350 Eye
St. NW reported an increase, from $155,100 in 2019 to nearly
$256,300 last year, though it did not officially open until
November 2019. And its Merrifield location, which opened in August,
posted revenue of $242,300 in 2020.
In its bankruptcy filing, Leon USA listed Brookfield among its
largest creditors, with an unpaid rent claim of $275,944. That made
the commercial real estate firm the second-biggest listed creditor,
behind only London-based Leon Restaurants Ltd., with an
intercompany loan claim of $9.95 million. The LLC for its first
initial location at 1724 L St. NW listed a claim of roughly
$185,500 in unpaid rent due to its landlord there, Lerner
Enterprises, while two other Leon LLCs listed unpaid rent claims of
roughly $124,326 and $29,400 to their landlords at 1350 Eye St. NW
and 2905 District Ave., respectively.
Per its website, Leon lists each of its local restaurants as either
temporarily closed or just closed. It's just the latest restaurant
casualty due at least in part to Covid fallout, a long list that
includes many well-known names across the region.
About Leon USA Inc.
Washington DC-based Leon USA Inc is a self-styled "naturally fast
food" chain launched in 2004 by Henry Dimbleby, an adviser to Boris
Johnson and former Bain & Company consultant, in partnership with
John Vincent.
According to PacerMonitor.com, Leon USA filed a Chapter 7
bankruptcy petition (Bankr. D.D.C. Case No. 21-00034) on Feb. 2,
2021. The Debtor disclosed $654,500 in assets and $10.36 million
in liabilities as of the bankruptcy filing.
Subsidiaries Leon Falalfel LLC, Leon Meatballs LLC, and LEON MOsaic
LLC also sought bankruptcy protection.
The Hon. Elizabeth L. Gunn is the case judge.
The Debtor's counsel:
Christopher A. Jones
Whiteford Taylor & Preston, LLP
Tel: 703-280-9263
E-mail: cajones@wtplaw.com
A first meeting of creditors under 11 U.S.C. Sec. 341(a) is
scheduled for March 11, 2021, at 11:00 a.m.
LEVI STRAUSS: Fitch Gives BB Rating on $500MM Unsec. Notes Due 2031
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Fitch Ratings has assigned a 'BB'/'RR4' rating to Levi Strauss &
Co.'s proposed USD500 million in senior unsecured notes due 2031.
Proceeds from the notes, along with USD300 million in cash on hand,
will be used to pay down USD800 million of unsecured notes due
2025.
At the onset of the coronavirus pandemic, Levi issued USD500
million in unsecured notes to fortify liquidity; this transaction
would eliminate USD300 million of the additional debt. Fitch
expects Levi to pay down an additional USD200 million in debt
during fiscal 2021 (ending November 2021), such that year-end
fiscal 2021 debt balances match those of year-end fiscal 2019.
In addition, Fitch has affirmed Levi's existing ratings, including
its Long-Term Issuer Default Rating (IDR) at 'BB', ABL at
'BBB-'/'RR1' and unsecured notes at 'BB'/'RR4'. The Rating Outlook
is Negative.
Levi's ratings reflect the significant business interruption
resulting from the coronavirus pandemic and changes in consumer
behavior, which have materially reduced sales of apparel, while the
Negative Outlook reflects uncertainty regarding the timing and
magnitude of a recovery in operating momentum.
Adjusted leverage increased to approximately 6.0x in fiscal 2020
from 3.1x in fiscal 2019 as EBITDA declined to approximately USD360
million from approximately USD750 million in fiscal 2019 on a
nearly 23% sales decline to USD4.45 billion. Adjusted leverage is
expected to be in the high-3.0x in fiscal 2021, assuming sales and
EBITDA declines of around 12% from fiscal 2019 levels. Increased
confidence in Levi's ability to achieve Fitch's projections and
bring adjusted leverage to under 4x would lead to a stabilization
in Fitch’s Ratings Outlook.
The company ended fiscal 2020 with USD1.59 billion of cash and no
borrowings on its USD850 million revolving credit facility. The
company's next debt maturity is USD1 billion of unsecured notes due
in 2025, of which USD800 million would be repaid in this proposed
transaction. In January 2021, the company extended the maturity of
its ABL to January 2026.
KEY RATING DRIVERS
Proposed Refinancing Transaction: Levi has proposed a refinancing
in which USD500 million of new unsecured notes due 2031 alongside
USD300 million of cash on hand would be used to repay USD800
million of Levi's USD1 billion of unsecured notes due 2025. In
April 2020, the company issued USD500 million of these notes to
fortify liquidity at the onset of the coronavirus pandemic in the
U.S. Fitch expected Levi to repay the debt as the operating
environment stabilized; consequently, Fitch's base case forecast
assumes the remaining USD200 million of debt added to Levi's
balance sheet in fiscal 2020 will be repaid during fiscal 2021.
Assuming a successful transaction close and subsequent repayment of
the remaining USD200 million, Levi's pro forma capital structure
would include approximately USD1 billion of debt (all unsecured
notes), similar to the end of fiscal 2019 prior to the pandemic.
Levi's pro forma maturity profile would improve; however, with
approximately USD500 million due in each of fiscal 2027/2031
compared with USD500 million due in each of fiscal 2025/2027 as of
the end of fiscal 2019.
Coronavirus Pandemic: The pandemic has severely impacted revenue
trajectories in categories like apparel, which have suffered from
mandated or proactive store closures, weak traffic at retailers of
apparel and accessories, and reduced wardrobe replenishment needs
from declines in social gatherings and increased incidence of
remote work arrangements. Numerous unknowns regarding the pandemic
remain including the timing of vaccine deployment, economic
conditions exiting the pandemic including unemployment and
household income trends, the level and impact of ongoing government
support of business and consumers, and the impact the crisis will
have on longer term consumer behavior.
Relative to many U.S.-based sellers of apparel, Levi's 2020
trajectory benefitted from its diverse presence across retail
formats, including categories like general merchandise which
remained open with strong traffic through the peak shelter in place
period. Levi's operating results troughed with a 62% revenue
decline in its May 2020 quarter, improving to declines of 27% and
12% in its August and November quarters, respectively.
Levi's fiscal 2020 revenue declined 23% to USD4.45 billion, with
EBITDA down approximately 50% to the USD360 million range, as
proactive expense reductions somewhat mitigated the impact of weak
sales. While Levi's full year revenue was in line with Fitch's
projections at the onset of the pandemic, the company's EBITDA
nearly doubled Fitch's expectation on stronger-than-expected cost
controls and merchandising actions to protect gross margin rates.
Fitch expects significant growth in fiscal 2021 against a weak
fiscal 2020, with revenue and EBITDA projected around USD5.2
billion and USD660 million, respectively. Despite the projected
expansion, these revenue and EBITDA estimates would represent
around 12% declines from Levi's pre-pandemic fiscal 2019 figures,
given lingering challenges in the apparel sector.
Revenue growth in fiscal 2022 could trend in the mid-single digit
range, with EBITDA approaching USD700 million. Achievement of these
results, in conjunction with expected debt reduction in fiscal
2021, would yield adjusted leverage trending in the high-3x range.
Increased confidence in Levi's ability to achieve Fitch's
projections as 2021 unfolds and bring adjusted leverage to under 4x
would lead to a stabilization in Fitch’s Ratings Outlook.
Strong Historical Top-Line Growth: Levi's top-line accelerated in
fiscals 2017 and 2018, with 8% revenue growth in fiscal 2017 and
14% in fiscal 2018 following modestly positive constant-currency
growth the prior few years. Constant currency growth moderated
somewhat in fiscal 2019 but was still strong at 6%, despite the
negative impact of a calendar shift which moved Black Friday into
Levi's fiscal 2020.
Results prior to the pandemic demonstrated that the company's
merchandising and branding efforts had borne fruit, with strong
growth across categories and geographies. Levi's brand and offering
were clearly trend-right prior to 2020, and the company
successfully exploited opportunities to capitalize on this momentum
through new product assortments, brand and celebrity
collaborations, and square-footage expansion.
Levi's positive constant currency growth over the past five years
is evidence of the company's somewhat resilient business model in
the face of apparel industry volatility, particularly for U.S.
brick-and-mortar mid-tier apparel retailers. The company's product
portfolio is primarily basic denim product, which is more
replenishment-oriented and relatively less susceptible to fashion
trend changes over time. The company is also broadly distributed
across retail channels, including department store and specialty,
but also general merchandise/discount and online; thus, Levi is
somewhat agnostic to the impact of shifts in shopping channels.
Strategic Growth Initiatives: Management has outlined three
strategic initiatives that should support Fitch's expectation of
low single digit positive sales growth over time, despite Levi's
somewhat mature business profile. The first is to drive the
profitable core businesses and brands through product innovation
and strengthened customer relationships. The core businesses are
the Levi's men's bottoms business globally, the Dockers brand in
the U.S. and key global wholesale accounts, such as Walmart, Inc.
(AA/Stable) and J.C. Penney Company, Inc.
An example of strengthening relationship is Levi's partnership with
Target Corporation (A-/Stable). Levi has sold its lower-priced
Denizen line to Target for approximately 10 years. In 2019, the
company began to sell its core line in a limited number of stores;
this will expand to 500 stores by the fall of 2021. In January
2021, Levi and Target announced a limited edition assortment of
denim-inspired products, including home accessories, would be
introduced in February 2021. This collection is part of Target's
ongoing strategy of offering unique, limited edition branded
collaborations to drive traffic and customer excitement.
The second initiative is to expand Levi's presence in
less-penetrated product categories and markets. Businesses to
expand include men's tops and outerwear, women's and key emerging
markets, such as Russia, India and China. Levi's women's line Revel
supported growth in recent years, especially in key emerging
markets.
Finally, Levi plans to grow its company-owned and omnichannel
presence. The company's owned retail stores and online channel
accounted for 39% of sales in fiscal 2020, with multi-brand
retailers and franchised Levi's locations accounting for the
remaining 61%. Direct-to-consumer online sales were around 8% of
total company sales. Levi plans to grow its company-owned and
online penetration rates through retail unit expansion and
investments in its e-commerce operations to improve the online
customer experience and functionality. Self-distribution both
enhances Levi's profit generation per unit sold and allows the
company greater control over its operating trajectory given the
highly dynamic retail landscape.
Evolving Financial Policy: Levi ended 2019 with leverage at 3.1x,
significantly lower than the recent peak of 5.3x in fiscal 2011.
While some of the improvement was due to EBITDA growth, the company
also directed FCF toward debt paydown, reducing debt around 50% to
USD1.1 billion beginning fiscal 2012 through the end of fiscal
2016.
Fitch does not anticipate meaningful debt reduction following the
expected repayment of fiscal 2020 borrowings. In fact, debt
issuance is a possibility as Levi explores tuck-in acquisitions to
expand its business scope or enhance its growth prospects. Levi's
growth funding sources also include its meaningful internal cash
flow generation and, following its 2019 initial public offering,
potential public equity issuance.
DERIVATION SUMMARY
Levi's 'BB' rating reflects the significant business interruption
resulting from the coronavirus pandemic and changes in consumer
behavior which have materially reduced sales of apparel, while the
Negative Outlook reflects uncertainty regarding the timing and
magnitude of a recovery in operating momentum. Adjusted leverage
increased to approximately 6.0x in fiscal 2020 from 3.1x in fiscal
2019 as EBITDA declined to approximately USD360 million from
approximately USD750 million in fiscal 2019 on a nearly 23% sales
decline to USD4.45 billion.
Adjusted leverage is expected to be around the mid-3.0x in fiscal
2021, assuming sales and EBITDA declines of around 12% from fiscal
2019 levels. The addition of USD500 million in unsecured notes in
fiscal 2020, which Fitch expects to be repaid in fiscal 2021, had
an approximately 0.5x impact on Levi's fiscal 2020 adjusted
leverage calculation.
Levi's ratings continue to reflect the company's position as one of
the world's largest branded apparel manufacturers, with broad
channel and geographic exposure, while also considering the
company's narrow focus on the Levi brand (around 85% of revenue)
and in bottoms (around 72% of revenue). The company benefits from
its broad distribution across department stores, specialty, mass,
and discount, in addition to self-distribution (nearly 40% of sales
are generated from company-operated stores and its online
presence), which somewhat mitigates secular challenges in the U.S.
mid-tier apparel industry.
The company's financial profile improved in recent years from a
focus on expense management and more stable constant currency
revenue growth, somewhat mitigated by the negative impact of the
strengthening U.S. dollar.
Similarly rated apparel and accessories peers include Capri
Holdings Limited (BB+/Negative), and Tapestry, Inc. (BB/Negative).
The ratings for Capri and Tapestry reflect their strong U.S
positioning and global presence in the handbag and leather goods
categories. Like Levi, operations for Capri and Tapestry are
dominated by a single brand, which somewhat limits diversification
and heightens fashion risk. Both Capri and Tapestry have made
leveraging acquisitions in recent years with somewhat disappointing
subsequent performance, on continued sluggishness for Capri's
Michael Kors brand and a difficult turnaround for Tapestry's
acquired Kate Spade brand.
Ratings and Negative Outlooks for each of these players reflect
medium-term consumer discretionary spending concerns triggered in
part by the coronavirus pandemic. By the end of 2021, adjusted
debt/EBITDAR could trend around 4.0x for Tapestry, and, assuming
some debt reduction, around the mid-3x range for Capri.
KEY ASSUMPTIONS
-- Fitch projects Levi's fiscal 2021 revenue could expand around
16% toward USD5.2 billion from depressed fiscal 2020 levels
although remain below the USD5.8 billion recorded in fiscal
2019. Revenue growth could moderate to around 5% in fiscal
2022 as traffic and interest in apparel continues to rebound,
with low-single digit revenue growth toward USD5.5 billion in
fiscal 2023.
-- EBITDA, which declined to approximately USD360 million in
fiscal 2020 from approximately USD750 million in fiscal 2019,
could improve toward USD650 million in fiscal 2021 as revenue
recovers. EBITDA margins, which declined to 8% in fiscal 2020
from 13% in fiscal 2019, could rebound to around 12.5% in
fiscal 2021. EBITDA could further improve toward USD700
million in fiscal 2022 with margins returning to the 13%
level, as some cost reductions and process improvements
undertaken during the pandemic could prove to be permanent.
-- FCF after dividends improved to approximately USD275 million
in fiscal 2020 from approximately USD125 million in fiscal
2019 despite EBITDA declines due to working capital benefits,
capex reductions and a mid-year suspension of Levi's dividend.
In fiscal 2021, FCF could be close to breakeven despite EBITDA
improvements, given working capital reversals and increases to
spending on capex and dividends. Assuming neutral working
capital, FCF in fiscal 2022 could be in the low USD200 million
range. Fitch expects the company to use cash on hand to pay
down USD500 million of debt in fiscal 2021, and could use FCF
beginning fiscal 2022 toward growth investments, including
tuck-in acquisitions.
-- Adjusted debt/EBITDAR, which rose to 6.0x in fiscal 2020 from
3.1x in fiscal 2019 on EBITDA declines and USD500 million of
unsecured notes issuance, could improve to around 3.7x in
fiscal 2021 on EBITDA improvement and the expected repayment
of USD500 million of debt. Adjusted leverage could trend in
the mid-3x range beginning fiscal 2022 assuming no change to
debt levels from the end of fiscal 2021.
-- Fitch's base case assumptions would support Levi's current
'BB' rating. As such, greater confidence in the company's
topline rebound during fiscal 2021 could yield a stabilization
of its Outlook.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- A positive rating action would be considered if Levi's
operating trajectory exceeded Fitch's expectations, yielding
EBITDA trending toward pre-pandemic levels of around USD750
million and consequently adjusted debt/EBITDAR (capitalizing
leases at 8x) below 3.5x.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A negative rating action would be considered top-line weakness
caused EBITDA to sustain at or below the mid-USD500 million
range, resulting in sustained adjusted debt/EBITDAR over 4.0x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Levi's liquidity is strong, supported by cash on
hand of USD1.59 billion and unused revolver availability of USD714
million as of Nov. 29, 2020, based on Levi's borrowing base, no
outstanding borrowings and net of USD30 million of letters of
credit and other minor borrowings. The USD850 million revolving
credit facility is secured by U.S. and Canadian inventories,
receivables and the U.S. Levi trademark, and benefits from upstream
guarantees from the domestic operating companies.
Availability is subject to a borrowing base, essentially defined as
95% of credit card receivables, plus 85% of net eligible accounts
receivable, plus 50% of raw materials inventory, plus 95% of
finished goods inventory, plus 100% of cash in the collateral
account and the U.S. Levi trademark. In January 2021, the company
amended the revolving credit facility. Material terms remained
substantially unchanged apart from the following, (i) the letter of
credit limit was reduced from $350 million to $150 million, and
(ii) the maturity date was extended to Jan. 5, 2026.
RECOVERY CONSIDERATIONS
Fitch does not employ a waterfall recovery analysis for issuers
assigned ratings in the 'BB' category. The further up the
speculative grade continuum a rating moves, the more compressed the
notching between the specific classes of issuances becomes. Fitch
assigned a 'BBB-'/'RR1' rating to Levi's ABL revolver, indicating
outstanding (91%-100%) recovery prospects in the event of default.
Fitch assigned a 'BB'/'RR4' rating to Levi's unsecured notes,
indicating average (31%-50%) recovery prospects.
SUMMARY OF FINANCIAL ADJUSTMENTS
-- Fitch has adjusted the historical and projected debt by adding
8x yearly operating lease expense.
-- In 2019, Fitch added back USD55 million in non-cash stock
based compensation as well USD3.5 million in one-time IPO
costs to its EBITDA calculation.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
LOGMEIN INC: Moody's Affirms B2 CFR & Cuts First Lien Loans to B2
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Moody's Investors Service affirmed LogMeIn, Inc. 's B2 Corporate
Family Rating, B2-PD Probability of Default Rating, and the Caa1
rating for the 2nd lien term loans. Moody's downgraded the ratings
for LogMeIn's 1st lien credit facilities to B2, from B1, to reflect
the erosion in junior debt cushion available to first priority
lenders as a result of the company's plans to refinance $200
million of 2nd lien term loans with proceeds from $200 million of
incremental 1st lien term loans. The ratings outlook is stable.
Affirmations:
Issuer: LogMeIn, Inc.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Senior Secured 2nd Lien Bank Credit Facility, Affirmed Caa1
(LGD6)
Downgrades:
Issuer: LogMeIn, Inc.
Senior Secured 1st Lien Bank Credit Facility, Downgraded to B2
(LGD3) from B1 (LGD3)
Senior Secured 1st Lien Regular Bond/Debenture, Downgraded to B2
(LGD3) from B1 (LGD3)
Outlook Actions:
Issuer: LogMeIn, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
LogMeIn's was acquired by affiliates of Francisco Partners and
Evergreen Coast Capital Corp. on August 31, 2020. Since the
acquisition, the company's operating performance has tracked in
line with our expectations and it also remains on track to execute
the planned $130 million of total cost savings by early 2021. The
affirmation of the B2 CFR reflects Moody's expectations for rapid
deleveraging over the next 12 to 18 months from growing
profitability driven by cost savings that are fully reflected in
the earnings and revenue growth. The company is benefiting from
stronger-than-normal demand for its communications and
collaboration tools amid social restrictions and remote work
requirements since the outbreak of the coronavirus epidemic.
The B2 CFR is constrained by LogMeIn's high leverage and a large
(albeit declining) proportion of revenues from mature products. The
company's growth-oriented products comprising its GoToConnect
Unified Communications as Service (UCaaS), LastPass and Bold360
Digital Engagement offerings address large and growing markets but
also face formidable competitors. It is unclear how demand for
LogMeIn's products and services will change once the pandemic
abates, although Moody's expects revenues from growth-oriented
products to offset declines in mature products and overall revenue
growth of at least the low single digits after the pandemic.
Moody's believes that there is upside to its revenue forecast if
the company can effectively execute its plans to increase operating
efficiency and drive growth from cross-selling and selling higher
value solutions to small and medium enterprises.
Total debt to EBITDA (incorporating Moody's standard analytical
adjustments, increase in deferred revenues and after expensing
capitalized software development costs) was approximately mid 7x
based on preliminary estimates of EBITDA for 2020, and before
including pro forma cost savings. The expensing of non-cash
stock-based compensation expense added about 1x to Moody's adjusted
leverage. Moody's expects LogMeIn's free cash flow to increase to
at least 5% of total adjusted debt and leverage to approach 6x over
the next 12 to 18 months.
LogMeIn's credit profile is supported by its good operating scale
with nearly $1.4 billion in annual revenues, a large share of
recurring revenues from subscription-based services, and strong
profitability even before the anticipated $130 million of cost
savings are included in earnings. LogMeIn's meeting solutions and
UCaaS offerings are well-regarded in the market. The company has
good liquidity comprising over $160 million of cash, pro forma for
the refinancing, access to an undrawn $250 million revolving credit
facility, and Moody's estimates of free cash flow of at least $175
million in 2021.
Governance considerations, specifically, the company's tolerance
for high financial risk and Moody's expectations for a
shareholder-friendly financial strategy under the ownership of
financial sponsors, constrain the rating.
The stable outlook reflects Moody's expectations for rapid
deleveraging and growth in profitability over the next 12 to 18
months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade is not expected over the next 12 to 24 months
given Moody's expectations for elevated financial leverage over
this period. Moody's could upgrade LogMeIn's rating over time if
the company generates EBITDA growth in the mid-single digit
percentages and commits to and maintains a more conservative
financial profile, including total debt to EBITDA below 5x (total
debt to EBITDA, incorporating Moody's standard analytical
adjustments, change in deferred revenues and after expensing
capitalized software development costs) and free cash flow in the
high single digit percentages of total debt. Conversely, Moody's
could downgrade LogMeIn's ratings if revenues decline, liquidity
becomes weak, or operating performance falls short of expectations
as a result of execution challenges or intense competition. The
rating could be downgraded if Moody's expects free cash flow to
remain below 5% of adjusted debt and leverage above the mid 6x
level on a sustained basis.
LogMeIn is a leading provider of unified communications and
collaboration, identity and access management, and customer
engagement and support solutions with approximately 2 million
customers globally.
The principal methodology used in these ratings was Software
Industry published in August 2018.
LSF9 ATLANTIS: Fitch Assigns First-Time 'B' LT IDR, Outlook Stable
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Fitch Ratings has assigned LSF9 Atlantis Holdings, LLC (Victra) a
Long-Term Issuer Default Rating (IDR) of 'B'. Fitch has also
assigned 'BB'/'RR1' ratings to the company's asset-based loan
(ABL), which is being downsized to $75 million from $85 million.
Fitch has assigned 'B+(EXP)'/'RR1' ratings to Victra's proposed
$635 million of secured notes, whose proceeds will be used to
refinance the company's existing term loan and pay a sponsor
dividend. The Rating Outlook is Stable.
The ratings reflect Victra's reasonably stable position as the
largest authorized retailer for the leading personal communications
provider Verizon Communications Inc. (A-/Stable) and the company's
good long-term operating track record, albeit mitigated by some
declines in recent years. The ratings consider the company's
relatively small scale and narrow product and brand focus within
the U.S. retail industry. Finally, the ratings reflect the
expectations of good cash flow of around $40 million annually prior
to any discretionary sponsor dividends and adjusted leverage
(adjusted debt/EBITDAR, capitalizing leases at 8x) trending between
5.5x and 6x following a proposed debt-financed dividend in 2021.
KEY RATING DRIVERS
Verizon-Authorized Retailer: Victra is a leading independent
retailer for Verizon Wireless and offers a full range of wireless
devices and services including, phones, tablets, mobile broadband,
wearable technology, accessories, and product insurance. The
company has been a partner to Verizon for over 25 years and
operates 931 stores across 43 states as of Dec. 31, 2020.
Victra's business profile is somewhat narrowly focused on a single,
relatively mature category and a single brand of service (Verizon).
The company analyzes its business based on gross profit per device
activation. Approximately two-third of gross profit per activation
is generated from the sale of the device, including commissions
from Verizon. Around 20% of gross profit is derived from the sale
of accessories, while the remaining is generated from a variety of
sources including the sale of device insurance products.
The company is majority owned by Lone Star Funds, which bought
Victra in 2016 for $550 million, or around 7x trailing EBITDA (per
the company).
Consumer Wireless Focus: Fitch views Victra's end market focus as
essentially neutral to the rating. Exposure to the consumer
wireless category limits Victra's economic cyclicality relative to
other discretionary retail categories. The growing importance of
wireless telephony to consumer's lives, evidenced by increased
usage and good growth over much of the past 25 years is likely to
limit spending declines in a recession. The complex nature of
device and contract purchases has also limited ecommerce incursion
relative to other segments, although growing consumer knowledge and
activation process simplification could prove to be disruptive to
bricks and mortar models over time.
The consumer wireless industry has shown recent signs of maturation
following a long period of good growth, culminating in declines in
device unit sales in 2018/2019 and a 5% decline in Victra's 2019
revenue to $1.46 billion. Historical growth in the category was a
combination of rising penetration, supportive upgrade/replacement
cycles and addition of new products (such as the tablet category)
and features to a consumer's wireless package. Fitch believes more
recent maturation is the result of tapering penetration of
smartphones and tablets and elongated replacement cycles due to
better-made hardware and successively less compelling device
upgrade features.
The expansion of 5G networks is expected to modestly accelerate
industry growth over the next two to three years, largely as
consumers upgrade devices to 5G-enabled products. As such, Fitch
expects Victra's revenue could expand low-single digits beginning
2021, similar to its forecast for Verizon.
Verizon Relationship: Victra exclusively partners with Verizon to
offer wireless contracts although offers devices manufactured by a
wide variety of OEMs. Victra is Verizon's largest retail partner,
operating approximately 14% of the 6,758 Verizon-branded stores
managed by Verizon or third parties. This channel represents around
70% of Verizon's device activations, with the remaining share split
amongst stores operated by Verizon and OEMs (including Apple),
retailers like Walmart Inc. (AA/Stable) and Best Buy, and ecommerce
operators like Amazon.com, Inc. (A+/Positive).
Victra benefits from its strong and longstanding relationship with
one of the leading players in the industry. The strength of the
relationship and Fitch's expectations for stable growth at Verizon
partially mitigate the lack of brand and category diversification
inherent in Victra's business model. The relationship also somewhat
protects the company competitively, as on a standalone basis it is
a relatively small player within retail and even the wireless
industry, with around $1.5 billion in 2019 revenue. Victra's
position and scale could benefit if Verizon further optimizes its
retail footprint as it has in the past through rationalizing its
partner-operated store fleet and allocating the stores to its
largest partners. The relationship limits Victra's risk of customer
defaults, as consumer receivables are transferred to Verizon post
purchase with Verizon maintaining customer collection
responsibility.
Victra's current contract with Verizon expires in 2022, and Fitch
would view non-renewal or weakening of terms as a credit negative.
Fitch's rating case assumes Victra and Verizon will renew their
contract with no material changes.
Victra ended 2020 with approximately 930 stores, after the closure
of 110 weaker-performing stores earlier in the year. Fitch's base
case assumes a relatively stable store count over the next three
years, with five to 10 openings and closures as the company
optimizes its real estate portfolio. Victra could benefit from
partner rationalization by Verizon, where contracts for smaller or
less successful retail partners are not renewed, allowing stronger
partners like Victra to gain share through reduced competition or
new store opportunities. Partner rationalization by Verizon could
therefore provide operating upside to Fitch's current base case for
Victra.
Coronavirus Impact: The pandemic has negatively impacted Victra's
topline, given slowing consumer traffic, particularly in the spring
months, and delays in new device introductions that have elongated
replacement cycles. While Victra stores were generally deemed
essential and have remained open this year, the company has seen
weak traffic due to shelter-in-place activity; it also temporarily
closed 201 stores and permanently closed another 110 as part of an
accelerated real estate portfolio review. New device delays include
the iPhone 12, which was released in November 2020 relative to
market expectations of a September 2020 introduction. Given these
challenges, Victra's revenue was down 4% through the first nine
months of 2020 and is projected to be down around 3% for the full
year to $1.43 billion, assuming near-flat revenue in the fourth
quarter.
Despite topline challenges, Fitch expects Victra to report around
20% EBITDA growth to approximately $130 million from $106 million
in 2019; EBITDA growth was approximately 20% through the first nine
months of the year. Fitch attributes much of the growth to
proactive expense reductions, including shortening of store
operating hours, store labor reductions and some layoffs and
furloughs across the business; EBITDA growth was also supported by
temporary relief from Verizon in the form of minimum commissions
and reduced transaction fees. While some of these benefits are
expected to reverse as traffic rebounds in 2021, the company views
certain actions taken in 2020 such as process simplification and
closure of unprofitable stores as permanent supports to EBITDA.
Modest EBITDA Growth Expected Beginning 2021: Fitch expects around
3% average annual EBITDA growth from 2021 to 2023 on modestly
positive topline growth, against a 2020 revenue and EBITDA base of
$1.43 billion and approximately $130 million, respectively. Revenue
is expected around 3% in 2021 as traffic improves from pandemic
levels and Victra benefits from delayed device introductions and
upgrades related to the 5G rollout. EBITDA growth in 2021 could be
in the mid-single digits on revenue expansion and annualization of
expense actions taken in 2020, including store closures and
layoffs. Revenue and EBITDA growth are expected to be modestly
positive in 2022 and 2023, with 2023 revenue and EBITDA around $1.5
billion and the low-$140 million range, respectively. Fitch's
topline forecast for Victra compares with its positive low-single
digit revenue growth forecast for Verizon over the 2021-2023
period.
Gross margin per device activation, which is a key metric analyzed
in the industry, grew at an approximately 4% CAGR from 2016 to
2019, per management, and was up 14% to $313 in 2020. Around
two-thirds of profit is generated from the sale of the device
itself, including reimbursements and commissions from Verizon and
volume discounts from suppliers. Approximately 20% of profit is
derived from accessories sales with around 10% from insurance.
Growth in gross profit per activation has been the result of
contractual improvements and better attach rates on add-on items
like accessories and phone insurance plans. Given well
above-average growth in 2020, Fitch expects gross profit per
activation to remain relatively stable in the $315 range over the
next two to three years.
Proposed Refinancing and Dividend: Victra has proposed a
refinancing transaction in which $635 million of new secured notes
and cash on hand would be used to repay the company's approximately
$580 million of term loans and fund a $90 million dividend to
sponsor Lone Star Funds. The new five-year notes would have a
second lien on ABL collateral and a first lien on the company's
remaining assets, a similar collateral package to the existing term
loan. At around $55 million of incremental debt on approximately
$200 million of EBITDAR, the transaction adds 0.25x to adjusted
leverage (adjusted debt to EBITDAR, capitalizing leases at 8x).
Leverage Expected Above 5.5x: Fitch expects Victra's adjusted
debt/EBITDAR (capitalizing leases at 8x) to trend around in the
5.6x-5.7x range beginning 2021, modestly above the 5.5x figure
expected in 2020 due to the proposed debt-financed dividend in
2021.
Victra has operated with adjusted leverage in the mid- to high-6x
range over the past three years, with projected deleveraging to
5.5x in 2020 largely the result of strong EBITDA growth. A
debt-financed sponsor dividend of $135 million in 2017 added around
0.8x to the company's adjusted leverage. Given the company's lack
of public financial policy and history of debt-financed dividends,
Fitch recognizes that future leveraging dividends may occur.
Positive Cash Flow: Victra's EBITDA generation, limited cash taxes
and low capital intensity have led to good operating cash flow
generation, despite around $50 million of interest expense annually
the past three years. Cash flow prior to sponsor dividends has
averaged around $35 million annually the past three years, with
some cash flow deployed toward term loan amortization and tuck-in
acquisitions of retail locations. In 2017, the company issued debt
to fund a $135 million sponsor dividend. In 2020, a $25 million
sponsor dividend was funded with cash on hand.
Cash flow, prior to any discretionary sponsor dividends, is
expected to be in the $40 million to $50 million range beginning
2020. The improvement relative to its recent history is due to
EBITDA expansion beginning 2020. The company's cash flow profile
benefits from its proposed refinancing of term loan debt to notes,
which eliminates required amortization. The approximately $90
million sponsor dividend proposed in 2021 is to be financed with
proceeds from the company's proposed $635 million notes offering.
DERIVATION SUMMARY
Victra's 'B'/Stable rating reflects its reasonably stable position
as the largest authorized retailer for leading personal
communications provider Verizon Communications Inc. (A-/Stable) and
the company's good longer-term operating track record, albeit
mitigated by some declines in recent years. The rating considers
the company's relatively small scale and narrow product and brand
focus within the U.S. retail industry. Finally, the rating reflects
the expectations of good cash flow of around $40 million annually
prior to any discretionary sponsor dividends and adjusted leverage
(adjusted debt/EBITDAR, capitalizing leases at 8x) trending around
5.7x following a proposed debt-financed dividend in 2021.
Victra's rating compares to Signet Jewelers Ltd (B/Negative) whose
rating reflects the significant business interruption from COVID-19
and its impact on consumer behavior. Fitch anticipates a sharp
increase in adjusted leverage to the mid-7x range in 2020 from 5.3x
in 2019 based on EBITDA declining to approximately $200 million
from $470 million in 2019 on a nearly 19% sales decline to $4.9
billion. Adjusted leverage could improve to the upper 4x range in
2021, assuming sales declines of around 4% from 2019 levels.
Rite Aid Corporation's 'B-'/Stable rating reflects continued
operational challenges, which have heightened questions regarding
the company's longer-term market position and the sustainability of
its capital structure. Persistent EBITDA declines have led to
negligible to modestly negative FCF and elevated adjusted
debt/EBITDAR in the low 7.0x range. Mitigating factors to these
concerns continue to including Rite Aid's ample liquidity of well
over $1 billion, supported by a rich asset base of pharmaceutical
inventory and prescription files. Other positives include the
somewhat more stable EnvisionRx pharmacy benefits manager (PBM)
business, representing around 30% of total EBITDA, and Rite Aid's
good real estate position in local markets, somewhat mitigated by
lack of broad-based national presence.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Fitch expects Victra's 2020 revenue to decline around 3% to
$1.43 billion on a flat fourth quarter, given 4% declines
through the first nine months of the year. Revenue is expected
to rebound 3% in 2021 on traffic improvements and the benefits
of the 5G rollout on device upgrade cycles. Revenue growth is
expected to be modestly positive beginning 2020, with topline
reaching $1.5 billion in 2023.
-- EBITDA, which was $106 million in 2019, could improve to
approximately $130 million in 2020 despite revenue declines on
expense management and some financial support from Verizon.
EBITDA growth is expected to be in the mid-single digits in
2021 on good revenue growth and the annualization of permanent
expense reductions such as layoffs and unprofitable store
closures, somewhat mitigated by lapping the support from
Verizon. EBITDA growth is expected to grow alongside revenue
growth beginning 2022, reaching the low-$140 million range in
2023.
-- Cash flow prior to sponsor dividends, which has averaged in
the mid-$30 million range over the 2017-2019 period, is
projected in the mid- to high-$40 million range beginning 2020
given higher EBITDA levels. The company issued a $135 million
sponsor dividend in 2017, a $25 million sponsor dividend in
2020 and has proposed a $90 million dividend for 2021. Fitch
expects cash flow could be used for tuck-in acquisitions of
stores but recognizes the potential for additional sponsor
dividends over the medium term.
-- Adjusted debt/EBITDAR, capitalizing leases at 8x, has averaged
in the mid-6x range over the 2017-2019 period, is projected to
be around 5.5x in 2020 on EBITDA growth. The company has
proposed a refinancing in which debt levels would climb
approximately $55 million to $635 million to support a sponsor
dividend. As such, 2021 adjusted leverage is projected in the
high-5x range despite modest EBITDA growth. Adjusted leverage
is expected to above 5.5x in 2022/2023 absent further debt
financed dividends or a leveraging acquisition.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade could result from better than expected operating
performance, yielding EBITDA sustaining above $150 million and
adjusted debt/EBITDAR (capitalizing leases at 8x) below 5.5x.
Given the company's history of debt-financed dividends, a
commitment to maintain the equivalent of Fitch-defined
adjusted leverage below 5.5x would also be required.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade could result from weaker than expected operating
performance, yielding EBITDA trending below $115 million,
moderating FCF generation and adjusted debt/EBITDAR above
6.5x. A downgrade could also result from further debt-financed
dividends bringing adjusted leverage above 6.5x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
As of Sept. 30, 2020, Victra had $115 million of cash on hand, $579
million outstanding on its senior secured term loan and no
borrowings outstanding on its $85 million ABL facility. As of Sept.
24, 2020 (the closest available date to month-end) ABL availability
was $38 million. Following the proposed transaction, Victra will
use part of proceeds from the proposed new $635 million senior
secured notes to pay down the outstanding term loan facility. The
remaining portion of the proceeds will be used to fund a $90
million sponsor dividend. Additionally, the company plans to
downsize its $85 million ABL Facility to $75 million and extend the
maturity to February 2026.
ABL availability is governed by a borrowing base which includes
inventory and receivables, largely from Verizon. The proposed
secured notes, which will be due February 2026, will have a second
lien on ABL assets and a first lien on Victra's remaining assets,
including net property, plant and equipment.
Recovery
Fitch's recovery analysis assumes Victra is maximized as a going
concern in a post default scenario, given a going-concern valuation
of approximately $500 million compared with an estimated $115
million in value from a liquidation of assets.
Fitch's going concern value is derived from a projected EBITDA of
$100 million. The scenario, which assumes Victra's contract with
Verizon remains intact, assumes revenue of approximately $1.2
billion, around 15% below 2020 revenue, assuming closing of around
100 lower-revenue stores and around 10% sales declines at the
remaining base. EBITDA margins could trend around 8% in a recovery
scenario, below the 9% range projected in 2020 albeit above the
7.2% produced in 2019 as some of the company's recent expense
reductions are expected to be permanent. A going concern multiple
of 5x was selected, within the 4x-8x range observed for North
American corporates, reflecting Fitch's assessment of Victra's
industry dynamics and company-specific factors.
The $450 million in value available to service debt, after
deducting 10% for administrative claims, yields full recovery for
the $75 million ABL, which is limited by a borrowing base including
eligible receivables and inventory and is assumed to be 70% drawn
at default. The ABL is therefore rated 'BB'/'RR1'. The proposed
term loan, which has a second lien on ABL collateral and a first
lien on Victra's remaining assets, is expected to have good
(51%-70%) recovery prospects and is therefore assigned a
'B+(EXP)'/'RR3' rating.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch adjusts for one-time charges and stock based compensation and
capitalized rent expense by 8.0x to calculate historical and
projected adjusted debt.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
LSF9 ATLANTIS: Moody's Affirms B2 CFR & Rates New Secured Notes B2
------------------------------------------------------------------
Moody's Investors Service assigned LSF9 Atlantis Holdings, LLC's
(dba "Victra") new senior secured notes a B2 rating. Concurrently,
Moody's affirmed Victra's B2 corporate family rating and B2-PD
probability of default rating. The outlook was changed to stable
from negative, and no action was taken on the on the B2 Senior
Secured Bank Credit Facility which will be withdrawn following the
transaction close.
These rating actions consider the proposed refinancing of the
company's Senior Secured Bank Credit Facility consisting of a term
loan and asset-based revolving credit facility due in 2023 and
2022, respectively, with proceeds from the proposed issuance of
$635 million senior secured notes and cash from the balance sheet.
A portion of the proceeds will be used to execute a $90 million
distribution to shareholders.
"The outlook change to stable reflects the company's better than
expected operating performance and an improvement in liquidity,"
stated Moody's Vice President Charlie O'Shea. "As an essential
retailer, Victra kept the vast majority of its stores open during
the various lockdowns, generating sales sufficient in combination
with tactical expense reductions to largely mitigate any negative
impact to its credit metrics," continued O'Shea. "We view the
refinancing as a credit positive as the transaction extends
maturities to 2026 and maintains the company's access to a
revolver."
Assignments:
Issuer: LSF9 Atlantis Holdings, LLC
Senior Secured Regular Bond/Debenture, Assigned B2 (LGD3)
Affirmations:
Issuer: LSF9 Atlantis Holdings, LLC
Probability of Default Rating, Affirmed B2-PD
Corporate Family Rating, Affirmed B2
Outlook Actions:
Issuer: LSF9 Atlantis Holdings, LLC
Outlook, Changed To Stable From Negative
RATINGS RATIONALE
Victra's B2 CFR reflects its reliance on cellphone manufacturers
for continued product innovation and the risk of volatile customer
demand related to new product introductions. A lengthening customer
replacement/upgrade cycle and declines in wireless activations are
also potrential constraints. Victra's rating is also constrained by
governance considerations particularly its financial strategies
which under its private equity owners, Lone Star Funds, include a
history of debt financed dividends. Pro forma for the proposed
dividend, Moody's expect's Victra's debt/EBITDA to slightly exceed
5.0x in 2021. Victra benefits from its symbiotic relationship with
Verizon Communications, Inc. (Baa1 positive) as it is Verizon's
largest independent retailer, the nondiscretionary nature of cell
phones, and beneficial relationships with the handset
manufacturers, Ratings also consider Victra's good liquidity.
The B2 rating on the company's proposed new $635 million senior
secured notes, in line with the company's corporate family rating,
follows application of Moody's Loss Given Default Methodology, and
considers their position in the capital structure between the
asset-based revolving credit facility and the subordinated lease
liabilities and trade payables.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Victra's good liquidity, market
position as Verizon's largest independent retailer and its private
equity ownership.
Ratings could be downgraded if liquidity were to weaken, or if
either deteriorating operating performance and/or financial
strategy actions resulted in debt/EBITDA approaching 6 times or
EBIT/Interest approaching 1.25 times. Ratings could be upgraded if
Victra maintains a conservative financial strategy towards
shareholder returns and future acquisitions, with improving
operating performance. Quantitatively, ratings could be upgraded if
debt/EBITDA was sustained around 4.5 times and EBIT/Interest was
sustained around 1.75x.
The principal methodology used in these ratings was Retail Industry
published in May 2018.
LFS9 Atlantis Holdings, LLC and subsidiaries, operating under the
Victra brand name, is the largest Verizon independent retailer and
operates 931 stores in 43 states. The company is majority owned by
Lone Star Funds and its affiliates. Revenue for the last twelve
month period ended September 30, 2020 was approximately $1.4
billion.
M TRAN CONSTRUCTION: Unsecured Creditors to Recover 5% in 41 Months
-------------------------------------------------------------------
M Tran Construction Inc. submitted a Combined Chapter 11 Plan of
Reorganization and Disclosure Statement.
Class 2 general unsecured claims will receive 5 percent of their
allowed claim in 41 equal monthly installments, due on the 15th day
of the month, starting April 2021.
On the Effective Date, all property of the estate and interests of
the Debtor will vest in the reorganized Debtor pursuant to Sec.
1141(b) of the Bankruptcy Code free and clear of all claims and
interests except as provided in this Plan, subject to revesting
upon conversion to Chapter 7.
A full-text copy of the Combined Chapter 11 Plan of Reorganization
and Disclosure Statement dated Feb. 1, 2021, is available at
https://bit.ly/36CHLtv from PacerMonitor.com at no charge.
About M-TranConstruction
M-TranConstruction, Inc., operates a construction business. It was
formed in 2004. Minh Tran is the sole shareholder and President of
the corporation.
M-TranConstruction filed for Chapter 11 bankruptcy protection
(Bankr. N.D. Cal. Case No. 19-51856) on Sept. 13, 2019, listing
under $1 million in both assets and liabilities. The Debtor is
represented by Mufthiha Sabaratnam, Esq., in Oakland, California.
MA REAL ESTATE: Seeks to Use Wildfire Credit Union Cash Collateral
------------------------------------------------------------------
MA Real Estate and Investments LLC asks the U.S. Bankruptcy Court
for the Eastern District of Michigan to approve its agreement with
Wildfire Credit Union for issuance of an interim order allowing the
use of cash collateral and granting adequate protection to
Wildfire.
The Debtor needs funds to operate. The Debtor has provided the
Court with a copy of its budget, which details projected
disbursements necessary to operate the Debtor's business through
February 28, 2021.
The Debtor says it does not have unencumbered cash to fund the
projected disbursements under the Budget. Accordingly, the Debtor
requires the use of collateral, including cash generated from the
Debtor's operations, to properly continue its business operations.
The need for use of cash collateral is immediate. In the absence of
such use, serious and irreparable harm to the Debtor and the estate
will occur.
The Debtor says Wildfire is the only secured creditor with an
interest in the cash collateral.
Pursuant to the Budget, the Debtor projects an immediate need for
the use of cash collateral not to exceed $19,811 to fund projected
disbursements.
As adequate protection for any use of cash collateral and any
post-petition diminution in the value of the prepetition
collateral, the Credit Union will be granted a replacement lien on
all post-petition property of the Debtor.
The estimated value of the prepetition collateral is $2,000,000 and
the Debtor says its obligation to the Credit Union is approximately
$1,300,000. Therefore, the Credit Union is adequately protected by
the substantial equity in its collateral.
As additional adequate protection for the Debtor's use of cash
collateral, the Debtor will pay to the Credit Union $2,000 within
one business day of the entry of an order approving the Motion.
A copy of the Motion and the Debtor's budget through February 29 is
available for free at https://bit.ly/2O0Lw5M from
PacerMonitor.com.
About MA Real Estate and Investments LLC
MA Real Estate and Investments, LLC is primarily engaged in renting
and leasing real estate properties.
MA Real Estate and Investments filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Mich.
Case No. 20-21715) on Dec. 10, 2020. The petition was signed by
Michael Reid, attorney-in-fact for Thomas P. LaPorte, the Debtor's
managing member.
At the time of filing, the Debtor estimated $1 million to $10
million in both assets and liabilities.
Judge Daniel S. Opperman in Bay City, Mich., oversees the case.
Warner Norcross & Judd, LLP represents the Debtor as counsel.
MAINEGENERAL HEALTH: Fitch Withdraws 'BB' Ratings
-------------------------------------------------
Fitch Ratings has withdrawn the following Issuer Default Rating
(IDR):
-- MaineGeneral Health (ME) IDR; Previous Rating: 'BB'/Outlook
Stable.
Additionally, Fitch has withdrawn its ratings for the following
bonds due to prerefunding activity:
-- Maine Health & Higher Education Facilities Authority (ME)
(MaineGeneral Health) revenue bonds series 2011 (prerefunded
maturities only - 560427MH6, 560427MJ2, 560427MK9, 560427ML7,
560427MM5, 560427MN3, 560427MP8, 560427MQ6, 560427MR4);
Previous Rating: 'BB'/Outlook Stable.
Following the withdrawal of MaineGeneral Health's ratings, Fitch
will no longer be providing the associated ESG Relevance Scores for
the issuer.
The ratings were withdrawn because the bonds were prerefunded and
the IDR is no longer considered by Fitch to be relevant to the
agency's coverage.
MALLINCKRODT PLC: Bid to Reconsider Preliminary Injunction Denied
-----------------------------------------------------------------
Judge John T. Dorsey of the United States Bankruptcy Court for the
District of Delaware denied the Motion for Reconsideration filed by
the Canadian Elevator Industry Pension Trust Fund (the "Trust") in
the case captioned In re: MALLINCKRODT PLC, et al., Chapter 11,
Debtors. MALLINCKRODT PLC, et al., Plaintiffs, v. State of
Connecticut, et al., Defendants, Case No. 20-12522 (JTD) (Jointly
Administered), Adv. Pro. No. 20-50850 (JTD).
The Debtors filed voluntary chapter 11 petitions on October 12,
2020. Simultaneously, the Debtors also filed an adversary
proceeding seeking a preliminary injunction extending the automatic
stay to certain actions filed in various state and federal courts
against the Debtors and certain third parties. The actions
included one brought by the Trust against the Debtors and certain
current and former officers and directors of the Debtors. The
Trust opposed the injunction. On November 23, 2020, Judge Dorsey
issued an oral ruling granting the preliminary injunction. An
order giving effect to the ruling was entered on December 4, 2020.
The Trust filed a Motion for Reconsideration on December 14, 2020
alleging that the Debtors had taken inconsistent positions
regarding certain director and officer insurance policies (the "D&O
Policies") and, therefore, the injunction was based upon a
misapprehension of a material fact. The Trust asserted that the
preliminary injunction was based solely on a finding that the D&O
Policies are property of the estate and that continuation of the
Strougo action would deplete those assets. They argue that the
Court's determination is incorrect because the Debtors' officers
and directors asserted in a separate filing that the proceeds of
the D&O Policies are not property of the estate and that
inconsistent treatment of the D&O Policies is irreconcilable.
Judge Dorsey determined that the Trust's argument fails on two
fronts.
First, Judge Dorsey held that the allegedly inconsistent treatment
of the D&O Policies is reconcilable. "I granted the limited motion
of the directors and officers to access the D&O Policies 'solely to
the extend necessary to permit the underwriters to pay and/or to
advance the defense costs up to the amount of $500,138.55 incurred
by the directors and officers in connection with the Strougo Action
before the date of this Order.' Nothing in the order states or
implies that the D&O Policies or their proceeds are not property of
the estate or that depletion of them would not cause irreparable
harm. Rather, the order is offering limited relief while leaving
the stay primarily in place," clarified the judge.
Second, Judge Dorsey held that even if he were to accept that his
findings regarding the D&O Policies were erroneous, the Trust
failed to allege that any of the other independent grounds upon
which the preliminary injunction rests should likewise be set
aside. The judge pointed out that the preliminary injunction was
based on multiple, independent grounds, and the Trust failed to
show that granting the Motion on a singular issue (the D&O
Policies) would affect the ultimate outcome or prevent manifest
injustice.
As to the question of when the period of the preliminary injunction
began to run, Judge Dorsey found that it began upon entry of the
order, not the oral ruling. The judge referred to Federal Rules of
Civil Procedure 58 and 65, made applicable to the proceedings
through Federal Rules of Bankruptcy Procedure 7058 and 7065, which
govern the procedural entry of an order for a preliminary
injunction. These rules stated that an order granting a
preliminary injunction must be set out in writing and entered on
the docket to take effect. For this reason, Judge Dorsey rejected
the Trust's contention that the injunction period began before the
entry of the order on December 4, 2020.
A full-text copy of Judge Dorsey's memorandum order dated January
27, 2021 is available at https://tinyurl.com/yxscr3ge from
Leagle.com.
About Mallinckdrodt PLC
Mallinckrodt -- http://www.mallinckrodt.com/-- is a global
business consisting of multiple wholly-owned subsidiaries that
develop, manufacture, market and distribute specialty
pharmaceutical products and therapies. The company's Specialty
Brands reportable segment's areas of focus include autoimmune and
rare diseases in specialty areas like neurology, rheumatology,
nephrology, pulmonology and ophthalmology; immunotherapy and
neonatal respiratory critical care therapies; analgesics; and
gastrointestinal products. Its Specialty Generics reportable
segment includes specialty generic drugs and active pharmaceutical
ingredients.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware in the U.S. (Bankr. D.
Del. Lead Case No. 20-12522) to seek approval of a restructuring
that would reduce total debt by $1.3 billion and resolve
opioid-related claims against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the Office of the United States Trustee for
Region 3 appointed an official committee of opioid related
claimants (OCC). The OCC tapped Akin Gump Strauss Hauer & Feld LLP
as its lead counsel, Cole Schotz as Delaware co-counsel, Province
Inc., as financial advisor, and Jefferies LLC as investment banker.
MALLINCKRODT PLC: Hires William Blair as Investment Banker
----------------------------------------------------------
Mallinckrodt plc and its affiliates seek approval from the U.S.
Bankruptcy Court for the District of Delaware to employ William
Blair & Company, L.L.C. as their investment banker.
The firm is retained solely in connection with a possible licensing
partnership for the development of an over-the-counter version of
the Debtors' AMITIZA product, a therapeutic used in connection with
pediatric constipation disorders, in the over the counter format.
The firm's services include:
(a) familiarizing itself to the extent it deems appropriate
with the business operations, financial condition and prospects of
the Business Unit;
(b) assisting the Debtors' management in developing a strategy
for pursuing a possible transaction;
(c) assisting the Debtors' management in (i) preparing
descriptive materials that describe the Business Unit's operations
and financial condition and include current financial data and
other appropriate information furnished
by the Debtors, (ii) contacting and eliciting interest from those
possible participants expressly approved by the Debtors, and (iii)
evaluating proposals received from any such possible participants;
(d) participating with the Debtors and their counsel in
negotiations relating to the possible transaction; and
(e) participating in meetings of the board of directors or
other governing body of the Debtors at which the possible
transaction is to be considered and, as appropriate, will report to
the Board with respect thereto.
The firm will be paid as follows:
(a) Monthly Fee. The Debtors shall pay Blair a professional
fee of $75,000 for the engagement, payable in monthly installments
over the first six months of the engagement. The first monthly fee
was paid upon execution of the Engagement Agreement.
(b) Financing Transaction. Upon the consummation of a Possible
Transaction, the Debtors shall pay or cause to be paid to Blair a
fee that shall be calculated as follows:
(i) The Debtors shall pay Blair a fee equal to 50 percent
of the Transaction Consideration on the first $4,000,000 for a
maximum potential payment of $2,000,000 payable to Blair (the
"Split Payment"); and
(ii) In the event the Transaction Consideration of a
Possible Transaction is greater than $72,727,272 (the 'Threshold
Amount'), Blair shall be entitled to a fee equal to 2.75 percent of
the Transaction Consideration above the Threshold Amount (the
'Threshold Payment' and together with the Split Payment, the
'Success Fee').
(iii) For the avoidance of doubt, under no circumstances
will the Transaction Consideration, Milestone Payments, or Success
Fee calculations include any royalty payments or other fees or
payments paid to the Debtors as a result of the successful
commercialization of the Business Unit’s products in any form.
The Success Fee shall be calculated based on the Transaction
Consideration and Milestone Payments, as such terms are defined in
the Engagement Agreement.
Blair is a "disinterested person" within the meaning of section
101(14) of the Bankruptcy Code, and holds no interest materially
adverse to the Debtors, their creditors, and shareholders, as
disclosed in the court filings.
The firm can be reached through:
Jason Michael Arnold
William Blair & Company, L.L.C.
The William Blair Building
150 North Riverside Plaza
Chicago, IL 60606
Phone: 312 236 1600
Fax: 800 621 0687
About Mallinckdrodt
Mallinckrodt is a global business consisting of multiple
wholly-owned subsidiaries that develop, manufacture, market and
distribute specialty pharmaceutical products and therapies. The
company's Specialty Brands reportable segment's areas of focus
include autoimmune and rare diseases in specialty areas like
neurology, rheumatology, nephrology, pulmonology and ophthalmology;
immunotherapy and neonatal respiratory critical care therapies;
analgesics; and gastrointestinal products. Its Specialty Generics
reportable segment includes specialty generic drugs and active
pharmaceutical ingredients. Visit http://www.mallinckrodt.comfor
more information.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware in the U.S. (Bankr. D.
Del. Lead Case No. 20-12522) to seek approval of a restructuring
that would reduce total debt by $1.3 billion and resolve
opioid-related claims against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the Office of the United States Trustee for
Region 3 appointed an official committee of opioid related
claimants (OCC). The OCC tapped Akin Gump Struss Hauer & Feld LLP
as its lead counsel, Cole Schotz as Delaware co-counsel, Province
Inc., as financial advisor, and Jefferies LLC as investment banker.
MEDIAOCEAN LLC: Moody's Completes Review, Retains B2 CFR
--------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Mediaocean LLC and other ratings that are associated
with the same analytical unit. The review was conducted through a
portfolio review discussion held on January 27, 2021 in which
Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Mediaocean LLC's B2 corporate family rating reflects the company's
small revenue base and narrow concentration of software solutions
for the cyclical advertising industry. The credit profile is also
constrained by the company's aggressive financial policies under
its private equity ownership. Mediaocean benefits from its leading
position in the software advertising markets and established client
relationships with the top advertising agencies. The company's
modest leverage, and very good liquidity provide support for the
credit profile as well. The July 2020 acquisition of 4C Insights
Inc. strengthened Mediaocean's positioning in the advertising
industry that is undergoing structural shifts given the rise of
digital advertising and increasing role of tech firms in the
market. Based on Moody's expectation for an economic recovery and
recovery in global advertising spending in 2021, Moody's forecast
that Mediaocean will generate mid-single digit revenue growth that
will support the company's leverage reduction toward 3.5x adjusted
debt to EBITDA and free cash flow to debt in the mid-teens
percentage range in the next 12 to 18 months assuming no debt
financed M&A.
The principal methodology used for this review was Software
Industry published in August 2018.
METRO PUERTO RICO: Court Grants 60-Day Plan Filing Extension
------------------------------------------------------------
Following a hearing on February 2, 2021, Judge Enrique S. Lamoutte
of the U.S. Bankruptcy Court for the District of Puerto Rico
extended Metro Puerto Rico LLC's exclusivity period for filing a
Chapter 11 Plan and Disclosure Statement for a limited period of 60
days.
Judge Lamoutte's Order came after the Court considered the joint
motion filed by the Debtor and Metro International Licensing, S.A.
de C.V. on January 25, 2021.
About Metro Puerto Rico
Metro Puerto Rico LLC filed its voluntary petition under Chapter 11
of the Bankruptcy Code (Bankr. D.P.R. Case No. 20-01543) on March
31, 2020. The petition was signed by Felix I. Caraballo,
president. At the time of filing, the Debtor estimated $1 million
to $10 million in assets and $500,000 to $1 million in
liabilities.
Judge Enrique S. Lamoutte oversees the case. Jose Prieto, of the
JPC LAW OFFICE, represents the Debtor.
NATIONAL RIFLE ASSOCIATION: Lets Critics Peer to Inner Workings
---------------------------------------------------------------
Steven Church of Bloomberg News reports that the National Rifle
Association may have handed ammunition to its critics when it filed
bankruptcy as part of an effort to defend itself from New York
regulators and others and reincorporate in Texas.
The Debtor is required in the coming weeks to submit a statement of
financial affairs that would require a detailed list of cash
payments it has made to insiders last 2020, any unusual property
transfers it has made to anyone within two years, and stakes in
other businesses in the last six years.
The U.S. Trustee, an arm of the U.S. Department of Justice, is also
slated to set up an official committee of unsecured creditors,
which has a power to launch new investigations into the NRA's
spending. Once a creditors committee is set up in the NRA's case,
its first action will be to hire lawyers, financial advisers and,
most likely, a forensic accountant, Howard Seife, head of the
bankruptcy practice at the Norton Rose Fulbright law firm, said.
"We have a technical term for it in the trade. It's called the
open kimono," said Howard Seife, head of the bankruptcy practice at
the Norton Rose Fulbright law firm.
Companies file bankruptcy for the chance to wipe away debt they
can't pay, but judges and lawyers often say the price of admission
is transparency. That means creditors have a right to look at
years of records, from spending and operating habits to, in some
cases, internal management discussions.
About the National Rifle Association
Founded in 1871 in New York State, the National Rifle Association
of America is a gun rights advocacy group. The NRA claims to be the
longest-standing civil rights organization and has more than five
million members.
Seeking to move its domicile and principal place of business to
Texas amid lawsuits in New York, National Rifle Association of
America sought Chapter 11 protection (Bankr. N.D. Tex. Case No.
21-30085) on Jan. 15, 2021. Affiliate Sea Girt LLC simultaneously
sought Chapter 11 protection (Case No. 21-30080).
The NRA was estimated to have assets and liabilities of $100
million to $500 million as of the bankruptcy filing.
The Hon. Stacey G. Jernigan is the case judge.
NELIGAN LLP, led by Patrick J. Neligan, Jr., is the Debtors'
counsel.
NAVIENT CORP: Fitch Assigns BB- Rating on USD500MM Unsec. Notes
---------------------------------------------------------------
Fitch Ratings has assigned a rating of 'BB-' to Navient
Corporation's issuance of $500 million, 4.875% senior unsecured
notes maturing in March 2028. Navient has a Long-Term Issuer
Default Rating (IDR) of 'BB-' with a Negative Outlook.
Proceeds from the senior unsecured debt issuance are expected to be
used for general corporate purposes, which may include the
repayment of unsecured debt maturing later this year.
KEY RATING DRIVERS
The unsecured debt rating is equalized with the ratings assigned to
Navient's existing senior unsecured debt, as the new notes will
rank equally in the capital structure. The alignment of the
unsecured debt rating with that of the Long-Term IDR reflects solid
unencumbered collateral coverage.
The Negative Outlook on the IDR reflects the downside risk to
Navient's financial profile metrics resulting from the wide-ranging
effects of the coronavirus pandemic on the U.S. higher education
sector and the broader economy, particularly the sharp rise in
unemployment.
While federal government programs, including loans/grants to small
businesses, enhanced unemployment insurance payments, and payments
to low and middle income households, combined with Navient's and
the federal government's extension of borrower payment deferrals or
forbearance, have helped mitigate the financial implications from
the pandemic, the degree to which the financial implications, most
notably borrower defaults, have been delayed rather than mitigated
remains uncertain.
RATING SENSITIVITIES
Navient's senior unsecured debt ratings are primarily linked to
changes in its Long-Term IDR. However, a reduction in unencumbered
collateral coverage that meaningfully reduces recovery prospects
for unsecured creditors, could result in the unsecured debt rating
being notched down from the Long-Term IDR.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Include a meaningful decline in Navient's adjusted tangible
common equity ratio over the next several quarters and/or a
sustained increase in secured funding as a percentage of
Navient's overall funding mix, such that unsecured debt
represents less than 10% of the company's funding.
-- Negative rating momentum could also occur from sustained core
operating losses, an increase in shareholder distributions
above Navient's core earnings, an inability to access the
capital markets on economic terms, significant deterioration
in credit performance, and/or an adverse outcome in the
pending CFPB/state attorneys general legal actions against the
company that significantly impairs its market position,
liquidity and/or future profitability.
Factors that could, individually or collectively, lead to positive
rating action:
-- Including a revision of the Outlook back to Stable, include
improved visibility of the company's credit performance and
profitability outlook such that there is an increased level of
confidence that Navient's performance relative to Fitch's
benchmark metrics will remain within cyclical norms over the
Outlook horizon, and the ability to demonstrate capital
resiliency through the current severely adverse economic
environment.
-- Longer term, meaningful improvements in core fee-business
growth and operating performance, a demonstrated ability to
successfully grow new businesses that enhance Navient's
earnings capacity and a moderation in shareholder
distributions could support positive ratings momentum.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Navient Corporation: Exposure to Social Impacts: '4'
Navient has an Environmental, Social and Corporate Governance (ESG)
Relevance Score of '4' for Exposure to Social Impacts due to its
exposure to a shift in social or consumer preferences as a result
of an institution's social positions, or social and/or political
disapproval of core activities which, in combination with other
factors, impacts the rating.
Unless otherwise disclosed in this section, the highest level of
ESG Credit Relevance is a Score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NEET DREAMS: U.S. Trustee Unable to Appoint Committee
-----------------------------------------------------
The U.S. Trustee for Region 21 on Feb. 3 disclosed in a court
filing that no official committee of unsecured creditors has been
appointed in the Chapter 11 case of Neet Dreams, LLC.
About Neet Dreams
Neet Dreams, LLC sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. N.D. Ga. Case No. 21-50047) on Jan. 4,
2021. At the time of the filing, the Debtor had estimated assets
of less than $50,000 and liabilities of between $100,001 and
$500,000. Judge Paul Baisier oversees the case. Perrie &
Associates, LLC is the Debtor's counsel.
NEIMAN MARCUS: Marble Ridge Founder Pleads Guilty to Fraud
----------------------------------------------------------
Chris Dolmetsch, Katherine Doherty, and Steven Church of Bloomberg
News report that Marble Ridge Capital founder Dan Kamensky pleaded
guilty to fraud, five months after he was charged with abusing his
position on a Neiman Marcus Group Inc. bankruptcy committee to
purchase assets at an artificially low price.
Kamensky, 48, of Roslyn, New York, was charged by federal
prosecutors in Manhattan in September 2020 with pressuring a rival
to abandon a higher bid for Neiman Marcus assets so Marble Ridge
could get them cheaper. The luxury department store chain filed
for Chapter 11 bankruptcy protection in May and Kamensky was a
member of a committee of unsecured creditors.
"Mr. Kamensky has admitted what he did was wrong," his lawyer, Joon
H. Kim, said in an emailed statement. "He deeply regrets his
conduct on July 31, 2020 and the great pain it has caused his
family, colleagues and others."
According to federal sentencing guidelines, Mr. Kamensky should get
12 to 18 months in prison, prosecutors said. Under the deal, either
side can ask for a sentence outside the guidelines, although a
judge isn't required to accept any recommendation. Kamensky, who is
free on bond, is scheduled to be sentenced on May 7, 2020. He could
face a fine of as much as $55,000.
Even in contentious bankruptcy cases, where creditors and debtors
often exchange charges of bad faith and unfair deal-making, it is
rare for criminal charges to be filed.
In a hearing last year before a bankruptcy judge in Houston who
referred Mr. Kamensky to federal prosecutors, the judge criticized
the investor in unusually personal language, at one point calling
him a thief "of the lowest character."
A day after Mr. Kamensky's arrest, the bankruptcy judge approved a
plan that handed ownership to Neiman Marcus creditors in return for
forgiving about $4 billion of the chain’s $5.5 billion in
borrowings.
"Daniel Kamensky abused his position as a committee member in the
Neiman Marcus bankruptcy to corrupt the process for distributing
assets and take extra profits for himself and his hedge fund,"
Acting Manhattan U.S. Attorney Audrey Strauss said in a statement
Wednesday, February 3, 2021.
New York-based Marble Ridge was founded in 2015 by Kamensky, a
former partner at hedge fund Paulson & Co. who started his career
as a bankruptcy attorney. The firm specialized in distressed debt
investments and the restructuring of troubled issuers.
Marble Ridge shut down and started returning money to investors in
August 2020 after a U.S. government investigation found Kamensky,
its managing partner, at fault for trying to interfere with
Neiman's auction of assets in bankruptcy.
Kamensky was accused of securities fraud, extortion and obstruction
for pressuring an investment bank to drop its plan to outbid Marble
Ridge for a stake in Neiman’s Mytheresa unit during the luxury
retailer’s bankruptcy, and then seeking to cover it up.
Creditors were demanding a piece of Mytheresa to compensate for
their losses and counting on Kamensky to help get the highest
return for everyone. U.S. officials claim Kamensky sought to take
advantage of his role to benefit his portfolio at the expense of
the other creditors.
As part of a separate settlement with the U.S. trustee, an arm of
the Justice Department that monitors corporate bankruptcies,
Kamensky agreed to pay $1.4 million to cover attorney fees related
to the investigation of his conduct and agreed not to try to
collect any debt Neiman Marcus may owe him until other creditors
are repaid. He also agreed to make $100,000 in charitable donations
and perform 200 hours of community service. Kamensky has agreed
never to serve on another official bankruptcy committee.
About Neiman Marcus Group
Neiman Marcus Group LTD, LLC -- https://www.neimanmarcus.com/ -- is
a luxury omni-channel retailer conducting store and online
operations principally under the Neiman Marcus, Bergdorf Goodman,
and Last Call brand names. It also operates the Horchow e-commerce
website offering luxury home furnishings and accessories. Since
opening in 1907 with just one store in Dallas, Neiman Marcus and
its affiliates have strategically grown to 67 stores across the
United States.
Weeks after being forced to temporarily shutter stores due to the
coronavirus pandemic, Neiman Marcus Group and 23 affiliates sought
Chapter 11 protection (Bankr. S.D. Tex. Lead Case No. 20-32519) on
May 7, 2020, after reaching an agreement with a significant
majority of our creditors to undergo a financial restructuring that
will substantially reduce the Company's debt load, and provide
access to considerable financing to ensure business continuity.
Kirkland & Ellis LLP is serving as legal counsel to the Company,
Lazard Ltd. is serving as the Company's investment banker, and
Berkeley Research Group is serving as the Company's financial
advisor. Stretto is the claims agent, maintaining the page
https://cases.stretto.com/NMG
Judge David R. Jones oversees the cases.
The Extended Term Loan Lenders are represented by Wachtell, Lipton,
Rosen & Katz as legal counsel, and Ducera Partners LLC as
investment banker.
The Noteholders are represented by Paul, Weiss, Rifkind, Wharton &
Garrison LLP as legal counsel and Houlihan Lokey as investment
banker.
NEWELL MOWING: Gets Cash Collateral Access Thru Feb. 17
-------------------------------------------------------
The U.S. Bankruptcy Court for the District of Colorado has
authorized The Newell Mowing Co., doing business as Green Man Lawn
and Landscape, to use cash collateral on an interim basis through
February 17, 2021, in accordance with an Interim Budget, however
the Debtor is not authorized to pay a $5,000 retainer to its
proposed accountant.
The Debtor requires use of the Cash Collateral to protect and
preserve ongoing operations by paying for monthly overhead
expenses, payroll and costs of goods sold.
A telephonic hearing is scheduled for February 17 at 1:30 p.m.
A copy of the Order is available at https://bit.ly/3tsZA88 from
PacerMonitor.com
About The Newell Mowing Co.
The Newell Mowing Co. filed for Chapter 11 bankruptcy protection
(Bankr. D. Colo. Case No. 20-17988) on Dec. 16, 2020. At the time
of filing, the Debtor estimated between $100,001 and $500,000 in
assets, and between $500,001 and $1 million in liabilities.
Judge Elizabeth E. Brown oversees the case.
Berken Cloyes, P.C. is the Debtor's legal counsel.
NEWELL MOWING: Seeks to Hire SL Biggs as Accountant
---------------------------------------------------
The Newell Mowing, Co. seeks approval from the U.S. Bankruptcy
Court for the District of Colorado to hire SL Biggs, a division of
Singer Lewak, as its accountant.
The firm will review unaudited financial statements for calendar
year 2020 in determining an accurate calculation of gross income to
disclose under an Amended Statement of Financial Affairs, assist
with preparing Monthly Operating
Reports, and analyzing 2016 through 2018 tax returns to assess
whether carryforward net operating losses existed on the petition
date as a potential asset of the bankruptcy estate.
The firm will be paid at these rates:
Mark D. Dennis, CPA $325 per hour
David E. Dennis, CPA $250 per hour
Bruce Beath, CPA $200 per hour
Associates $145 per hour
The firm is a "disinterested person" as such term is defined under
11 U.S.C. Sec. 101(14), as disclosed in the court filing.
The firm can be reached through:
Mark D. Dennis, CPA
SL Biggs, A Division of SingerLewak LLP
2000 South Colorado Boulevard
Tower II, Suite 200
Denver, CO 80222
Tel: (303) 694-6700
Fax: (303) 694-6761
About Newell Mowing
The Newell Mowing Co. filed for Chapter 11 bankruptcy protection
(Bankr. D. Colo. Case No. 20-17988) on Dec. 16, 2020. At the time
of the filing, the Debtor had estimated assets of between $100,001
and $500,000 and liabilities of between $500,001 and $1 million.
Berken Cloyes, P.C. is the Debtor's legal counsel. The Debtor
tapped SL Biggs as its accountant.
NORBORD INC: West Fraser Deal No Impact on Moody's Ba1 Rating
-------------------------------------------------------------
Moody's Investors Service said that the acquisition of Norbord Inc.
(Norbord, Ba1 Ratings Under Review) by West Fraser Timber Co.
Ltd.'s (West Fraser, Baa3) will have no immediate impact on
Norbord's Ba1 rating or review for upgrade following the
stock-for-stock acquisition that closed.
As part of the transaction, West Fraser has secured $1.3 billion in
committed credit facilities, which may be used to redeem Norbord's
$665 million of bonds (rated Ba1), which has a change of control
put. Given recent trading prices, it is uncertain if Norbord's
bonds will be put. If Norbord's rated debt is assumed by West
Fraser in a manner that leaves Norbord's bonds essentially pari
passu with West Fraser's senior unsecured notes, Norbord's bonds
will likely be rated in-line with West Fraser's rating. If this
does not occur, Norbord's bond rating will be based on the
stand-alone credit profile of Norbord plus anticipated support from
West Fraser (subject to receiving adequate financial information to
determine and maintain the Norbord bond rating). Moody's expects to
resolve the review once Moody's have a better understanding of the
final capital structure, including legal and/or implicit credit
support be provided by West Fraser.
Headquartered in Toronto, Ontario , Norbord is an international
producer of panel boards. It is the largest producer of oriented
strand board (OSB) in North America and third largest in Europe.
LTM September 2020 sales were almost $2 billion.
Headquartered in Vancouver, British Columbia, West Fraser is the
leading North American producer of lumber and is the largest
plywood producer in Canada. The company also produces pulp and
newsprint in Western Canada. LTM September 2020 sales were about $4
billion.
OCEAN POWER: Acquires Offshore Energy Engineering Firm 3Dent
------------------------------------------------------------
Ocean Power Technologies, Inc. has acquired 3Dent Technology, LLC,
an offshore energy engineering and design services company based in
Houston, Texas. OPT's first acquisition brings additional revenue
from 3Dent's established project and customer base. 3Dent's
complementary services expand OPT's ability to provide
comprehensive solutions to customers operating in rapidly evolving
markets such as offshore wind and offshore oil and gas. 3Dent
Technology will operate under its current brand name as a wholly
owned subsidiary of Ocean Power Technologies, Inc.
Established in 2013, 3Dent Technology has built a dedicated team of
engineers and naval architects to support oil and gas, offshore
wind, and other industries, from early-stage innovation to detailed
structural analysis. Their services include simulation engineering
of hydrodynamic and structural applications, concept design,
software engineering, and vessel monitoring for drilling
contractors, construction yards, major oil companies, service
companies, and engineering firms.
"The 3Dent Technology acquisition is an important first step within
our long-term growth strategy to expand our market value
proposition while building OPT's revenue," said George H. Kirby,
president and CEO of OPT. "3Dent brings significant expertise in
offshore engineering to OPT and our customers by providing complete
project lifecycle engineering services, from concept through
installation to decommissioning, including early-stage feasibility
and design. Together, we are well-positioned to bring added value
to our customers while expanding into new markets such as ocean
renewables."
"We believe that we have been very successful in providing creative
and technically sound problem-solving expertise to the offshore
industry, and OPT's commercial experience and technology align well
with our expertise. Together we believe that we can accelerate the
growth of our offshore engineering services while solidifying and
expanding OPT's position as an offshore energy solution provider,"
said Dr. Jose Vazquez, co-founder and president of 3Dent
Technology," Mr. Kirby said.
"We are very excited to capitalize on our shared focus and vision
to become an integral part of OPT's long-term growth strategy," Mr.
Kirby further said.
Under the terms of the deal, OPT agreed to pay 3Dent an amount of
stock equal to $800,000 using the closing strike price on Dec. 11,
2020 –- the date that the parties executed a non-binding letter
of intent -- equating to 361,991 shares of OPT common stock.
About Ocean Power Technologies
Headquartered in Monroe Township, New Jersey, Ocean Power
Technologies, Inc. -- http://www.oceanpowertechnologies.com-- is a
marine power solutions provider that designs, manufactures, sells,
and services its products while working closely with partners that
provide payloads, integration services, and marine installation
services. Its PowerBuoy solutions platform provides clean and
reliable electric power and real-time data communications for
remote offshore and subsea applications in markets such as offshore
oil and gas, defense and security, science and research, and
communications.
Ocean Power reported a net loss of $10.35 million for the 12 months
ended April 30, 2020, compared to a net loss of $12.25 million for
the 12 months ended April 30, 2019. As of Oct. 31, 2020, the
Company had $18.56 million in total assets, $4.91 million in total
liabilities, and $13.65 million in total stockholders' equity.
KPMG LLP, in Philadelphia, Pennsylvania, the Company's auditor
since 2004, issued a "going concern" qualification in its report
dated June 29, 2020, citing that the Company has suffered recurring
losses from operations and has an accumulated deficit that raise
substantial doubt about its ability to continue as a going concern.
ONE AVIATION: Mediation Not Recommended for Appealed Issues
-----------------------------------------------------------
In the case captioned In re ONE AVIATION CORPORATION, et al.,
Chapter 11, Debtors. CITIKING INTERNATIONAL US LLC, Appellant, v.
ONE AVIATION CORPORATION, et al., Appellees, Case No. 18-12309
(CSS), C. A. No. 20-1569-CFC (D. Del.), Judge Mary Pat Thynge of
the United States District Court for the District of Delaware
recommended that the matter be withdrawn from the mandatory
referral for mediation and proceed through the appellate process of
the Court.
After conducting a screening process pursuant to paragraph 2(a) of
the Procedures to Govern Mediation of Appeals from the United
States Bankruptcy Court for the District of Delaware, Judge Thynge
determined that the issues involved in the case are not amenable to
mediation and that mediation at this stage would not be a
productive exercise, a worthwhile use of judicial resources nor
warrant the expense of the process.
Although the parties are involved in mediation regarding the
underlying bankruptcy case, the judge found that this mediation was
not focused on and was unrelated to the issues on appeal.
A full-text copy of Judge Thynge's recommendation dated January 26,
2021 is available at https://tinyurl.com/y54dmftc from Leagle.com.
About ONE Aviation Corporation
Headquartered in Albuquerque, New Mexico, ONE Aviation Corporation
-- http://www.oneaviation.aero/-- and its subsidiaries are
original equipment manufacturers of twin-engine light jet
aircraft.
ONE Aviation provides maintenance and upgrade services for their
existing fleet of aircraft through two Company-owned Platinum
Service Centers in Albuquerque, New Mexico and Aurora, Illinois,
five licensed, global Gold Service Centers in locations including
San Diego, California, Boca Raton, Florida, Friedrichshafen,
Germany, Eelde, Netherlands, and Istanbul, Turkey, as well as a
research and development center located in Superior, Wisconsin. It
currently employs 64 individuals.
ONE Aviation and its affiliates filed for chapter 11 bankruptcy
protection (Bankr. D. Del. Case. Nos. 18-12309 - 18-12320) on Oct.
9, 2018, listing its estimated assets at $10 million to $50 million
and estimated liabilities at $100 million to $500 million. The
petition was signed by Alan Klapmeier, CEO.
The Debtors tapped Paul Hastings LLP as their bankruptcy counsel;
Young Conaway Stargatt & Taylor, LLP as co-counsel of Paul
Hastings; Ernst & Young LLP as financial advisor; Duff & Phelps
Securities, LLC as investment banker; and Epiq Corporate
Restructuring, LLC as its claims and noticing agent.
The Office of the U.S. Trustee appointed an official committee of
unsecured creditors on Oct. 22, 2018. The committee tapped
Lowenstein Sandler LLP as its legal counsel; Landis Rath & Cobb LLP
as the firm's co-counsel; and Conway MacKenzie, Inc. as financial
advisor.
PARSLEY ENERGY: Moody's Confirms Ba2 CFR Amid Pioneer Transaction
-----------------------------------------------------------------
Moody's Investors Service confirmed Parsley Energy LLC's Ba2
Corporate Family Rating and Ba3 senior unsecured notes rating. The
outlook was changed to stable from rating under review. The ratings
for Parsley's wholly-owned subsidiary Jagged Peak Energy LLC were
withdrawn, including its Ba3 backed senior unsecured notes rating
and rating under review outlook. This rating action concludes the
review initiated on October 22, 2020 following Parsley's
announcement it was being acquired by Pioneer Natural Resources
Company (Pioneer, Baa2 stable).
These actions follow the close of Pioneer's tender offer dated
December 30, 2020. Immediately following the rating action, Moody's
will subsequently withdraw all Parsley's ratings as Moody's
believes it lacks sufficient information to maintain a rating on
the portions of Parsley's 2027 and 2028 notes that remain
outstanding following the tender. All other pre-acquisition Parsley
and Jagged Peak debt was refinanced by Pioneer.
Confirmations:
Issuer: Parsley Energy LLC
Probability of Default Rating, Confirmed at Ba2-PD
Corporate Family Rating, Confirmed at Ba2
Senior Unsecured Regular Bond/Debenture, Confirmed at Ba3 (LGD4)
Outlook Actions:
Issuer: Parsley Energy LLC
Outlook, changed to stable, previously Ratings Under Review
Issuer: Jagged Peak Energy LLC
Outlook, changed to Ratings Withdrawn from Ratings Under Review
Withdrawals:
Issuer: Jagged Peak Energy LLC
Senior Unsecured Regular Bond/Debenture, previously Placed on
Review for Upgrade, Ba3 (LGD4)
RATINGS RATIONALE
Moody's will withdraw Parsley's ratings because Moody's believes it
lacks sufficient information to maintain ratings on Parsley's
remaining outstanding debt following the completion of Pioneer's
tender. Moody's withdrew Jagged Peak's ratings, reflecting full
repayment of its debt.
The principal methodology used in these ratings was Independent
Exploration and Production Industry published in May 2017.
PEAK SERVICES: Gets Cash Collateral Access Thru March 31
--------------------------------------------------------
The U.S. Bankruptcy Court for the District of Colorado has
authorized Peak Services Colorado, Inc. to use cash collateral on
an interim basis in accordance with the budget through March 31,
2021.
The Debtor requires use of cash collateral to avoid irreparable
harm to its business. The Court says the Debtor has shown cause
for granting the requested relief.
The Court says the secured creditors will have a replacement lien
on the Debtor's postpetition receivables as collateral, to the same
extent and priority as existed prepetition and to the extent that
the use of cash collateral results in the decrease in the secured
lender's interests in the cash collateral.
A copy of the Order is available at https://bit.ly/36Gna7G from
PacerMonitor.com.
About Peak Services Colorado, Inc
Peak Services Colorado, Inc., filed a voluntary petition under
Chapter 11 of the Bankruptcy Code (Bankr. D. Colo. Case No.
20-17961) on Dec. 11, 2020. At the time of filing, the Debtor
estimated $100,001 to $500,000 in both assets and liabilities.
Judge Kimberley H. Tyson oversees the case.
Stephen E. Berken, Esq. at Berken Cloyes P.C. represents the Debtor
as counsel.
PEARL CITY, MS: Moody's Affirms Ba2 Rating on GO Bonds
------------------------------------------------------
Moody's Investors Service has affirmed the Ba2 rating on the City
of Pearl, Mississippi's general obligation bonds. Moody's has also
revised the outlook to positive from negative. The rating applies
to the city's General Obligation Bonds Series 2010 and Series 2007,
which are outstanding in the combined amount of $3.7 million.
RATINGS RATIONALE
The rating affirmation reflects the city's narrow but improving
fiscal position highlighted by stronger general fund cash and fund
balances, the elimination of short-term borrowing for cash flow,
reduced payables from the general fund, and a solid projected
operating surplus for fiscal 2020 and 2021. The rating also
reflects the city's moderately sized but stable tax base and
moderate long term liabilities driving elevated fixed costs. The
improved governance and management functions of the city are a key
credit factor. This is improvement is reflected by stronger budget
controls and improved projected operating performance.
RATING OUTLOOK
The positive outlook reflects Moody's expectation that the city's
improved financial management will produce a timely audit that will
reflect material growth to cash and reserves and that this momentum
will be continued through fiscal 2021.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
Sustained improvement to cash and fund balances
Elimination of general fund payables to other funds
Material broadening of the tax base and economy
Strengthened resident wealth
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
Weakened cash or fund balances
Lack of timely financial reporting
General fund reliance on enterprise funds for liquidity
LEGAL SECURITY
The city's general obligation bonds are secured by an annual ad
valorem tax, levied against all taxable property in the city
without legal limitation as to rate or amount.
USE OF PROCEEDS
Not applicable
PROFILE
The City of Pearl is located in Rankin County (Aa1), approximately
2 miles east of the state capital of Jackson (Baa3 stable),
Mississippi, and has a population of approximately 26,500.
METHODOLOGY
The principal methodology used in these ratings was US Local
Government General Obligation Debt published in January 2021.
PLANVIEW PARENT: Moody's Completes Review, Retains B3 CFR
---------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Planview Parent, Inc. and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Planview Parent, Inc.'s B3 corporate family rating reflects the
company's small scale when compared to larger diversified
competitors and product concentration, which exposes Planview to
revenue volatility. Additionally, the company's private equity
ownership will increase financial risk over the intermediate term
through debt financed acquisitions or other shareholder friendly
events. However, Planview will benefit from its stable based of
recurring revenue and low capital expenditure requirements,
resulting in solid free cash flow generation. The growing need for
project and portfolio management solutions at large companies, as
well as the company's niche position in the PPM market will allow
the experience secular growth drivers over the near term. Moody's
expects some near term margin pressure as spending normalizes
following steep spending reductions in 2020 to address the Covid-19
crisis. Moody's expects margins to gradually improve over the next
18 months with the gradual reopening of economies, such that the
EBITDA margin will exceed 37% (Moody's adjusted) and debt to EBITDA
will decline toward the mid 7x range (Moody's adjusted). Given the
strong translation of EBITDA into FCF, Moody's anticipates that FCF
to debt will approach the mid 6 percent level (Moody's adjusted)
over the period.
The principal methodology used for this review was Software
Industry published in August 2018.
POINT LOOKOUT: Seeks to Hire Joann M. Wood as Special Counsel
-------------------------------------------------------------
Point Lookout Marine Properties, Inc. filed an amended application
seeking approval from the U.S. Bankruptcy Court for the District of
Columbia to employ the Law Office of Joann M. Wood, LLC as special
counsel.
The Debtor requires the firm's services to draft a deed, conduct a
closing and generally give legal advice about issues related to the
potential sale of its marina located in St. Mary's County, Md.
The firm will be paid at these rates:
Joann M. Wood, principal $350 per hour
Non-attorney staff $100 per hour
The firm will also be reimbursed for out-of-pocket expenses
incurred.
The firm requires an initial retainer of $5,000 in order to
commence work on behalf of the bankruptcy estate.
Joann Wood, Esq., a partner at the Law Office of Joann M. Wood,
disclosed in a court filing that her firm is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code.
The firm can be reached at:
Joann M. Wood, Esq.
Law Office of Joann M. Wood, LLC
23087 Three Notch Rd.
California, MD 20619
Tel: (301) 737-8882
About Point Lookout Marine Properties
Point Lookout Marine Properties, Inc. is the owner of fee simple
title to real property and improvements located at 16244 Whitaker
Court St. Inigoes, Md., having a current value of $1.7 million.
Point Lookout Marine Properties filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Md. Case
No. 20-20986) on Dec. 24, 2020. Joseph N. Salvo, president of Point
Lookout, signed the petition.
At the time of the filing, the Debtor disclosed total assets of
$1,700,000 and total liabilities of $1,993,421.
Cohen Baldinger & Greenfeld, LLC and the Law Office of Joann M.
Wood, LLC serve as the Debtor's bankruptcy counsel and special
counsel, respectively.
PRFESSIONAL INVESTORS 43: Involuntary Chapter 11 Case Summary
-------------------------------------------------------------
Alleged Debtor: Professional Investors 43, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Case Number: 21-30085
Business Description: Professional Investors 43, LLC is a Single
Asset Real Estate company (as defined in 11
U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and Barret J. Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Nature of
Claim & Claim Amount: $20,113 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/2HXIM3Q/Professional_Investors_43_LLC__canbke-21-30085__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 38: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 38, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 38, LLC is a Single
Asset Real Estate (as defined in 11 U.S.C.
Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30087
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Nature of Claim &
Claim Amount: $49,028 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/VQ2PGXI/Professional_Investors_38_LLC__canbke-21-30082__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 39: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 39, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 39, LLC is a Single
Asset Real Estate company (as defined in 11
U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30083
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Claim Amount &
Nature of Claim: $20,137 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/V4HSZEY/Professional_Investors_39_LLC__canbke-21-30083__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 42: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 42, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 42, LLC is a Single
Asset Real Estate company (as defined in 11
U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30084
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Claim Amount &
Nature of Claim: $49,514 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/VZ33VRA/Professional_Investors_42_LLC__canbke-21-30084__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 44: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 44, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 44, LLC
is a Single Asset Real Estate company
(as defined in 11 U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30086
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's Nature of
Claim & Claim Amount: $24,157 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/3DTEYMI/Professional_Investors_44_LLC__canbke-21-30086__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 45: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 45, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 45, LLC is a Single
Asset Real Estate company (as defined in 11
U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30087
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Nature of Claim &
Claim Amount: $25,674 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/3K2Q4YA/Professional_Investors_45_LLC__canbke-21-30087__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 47: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 47, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 47, LLC is a Single
Asset Real Estate company (as defined in 11
U.S.C. Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30088
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
Email: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Claim Amount &
Nature of Claim: $23,977 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/3SUGRTA/Professional_Investors_47_LLC__canbke-21-30088__0001.0.pdf?mcid=tGE4TAMA
PROFESSIONAL INVESTORS 48: Involuntary Chapter 11 Case Summary
--------------------------------------------------------------
Alleged Debtor: Professional Investors 48, LLC
350 Ignacio Blvd.
Suite 300
Novato, CA 94949
Business Description: Professional Investors 48, LLC is a Single
Asset Real Estate (as defined in 11 U.S.C.
Section 101(51B)).
Involuntary Chapter
11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of California
Case Number: 21-30089
Petitioner: Professional Financial Investors, Inc.
350 Ignacio Blvd., Suite 300
Novato, CA 94949
Petitioner's Counsel: Ori Katz, Esq. and J. Barret Marum, Esq.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Tel: 415-434-9100
E-mail: okatz@sheppardmullin.com/
bmarum@sheppardmullin.com
Petitioner's
Claim Amount &
Nature of Claim: $49,978 for management fees and
administrative costs
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/3YF3LHI/Professional_Investors_48_LLC__canbke-21-30089__0001.0.pdf?mcid=tGE4TAMA
PROJECT ALPHA: Moody's Completes Review, Retains B3 Rating
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Project Alpha Intermediate Holding, Inc. and other
ratings that are associated with the same analytical unit. The
review was conducted through a portfolio review discussion held on
January 27, 2021 in which Moody's reassessed the appropriateness of
the ratings in the context of the relevant principal
methodology(ies), recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations.
The B3 rating reflect's Project Alpha Intermediate Holding, Inc.'s
(Qlik) elevated financial leverage of over 6x and Moody's
expectation for high financial risk tolerance under the ownership
of financial sponsors. Qlik's Business Intelligence and data
integration software products have good growth prospects but they
face intense competition. Qlik's credit profile benefits from its
well-regarded core product offerings, good operating scale, growing
proportion of recurring revenues and a large installed base of
customers. The outbreak of COVID-19 has negatively impacted Qlik's
license sales but the company offset the impact on profitability
from lower variable expenses and cost restructuring. Moody's
expects Qlik's revenue growth to accelerate in 2021 driven by
subscription sales and free cash flow in the high single digit
percentages of total adjusted debt.
The principal methodology used for this review was Software
Industry published in August 2018.
RENOVATE AMERICA: Committee Hires Troutman Pepper as Counsel
------------------------------------------------------------
The official committee of unsecured creditors of Renovate America,
Inc. and its affiliates seeks approval from the U.S. Bankruptcy
Court for the District of Delaware to retain Troutman Pepper
Hamilton Sanders LLP as its counsel.
The firm will render these services:
a. advise the Committee with respect to its rights, duties and
powers in these cases;
b. assist and advise the Committee in its consultations with
the Debtors relating to the administration of these cases;
c. assist the Committee in analyzing the claims of the
Debtors' creditors and the Debtors' capital structure and in
negotiating with the holders of claims and, if appropriate, equity
interests;
d. assist the Committee's investigation of the acts, conduct,
assets, liabilities and financial condition of the Debtors and
other parties involved with the Debtors, and the operation of the
Debtors' businesses;
e. assist the Committee in its analysis of, and negotiations
with the Debtors or any other third parties concerning matters
related to, among other things, the assumption or rejection of
certain leases of non-residential real property and executory
contracts, asset dispositions, financing transactions and the terms
of a plan of reorganization or liquidation for the Debtors;
f. assist and advise the Committee as to its communications,
if any, to the general creditor body regarding significant matters
in this case;
g. represent the Committee at all hearings and other
proceedings;
h. review, analyze, and advise the Committee with respect to
applications, orders, statements of operations and schedules filed
with the Court;
i. assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the Committee's
interests and objectives; and
j. perform such other services as may be required and which
are deemed to be in the interests of the Committee in accordance
with the Committee's powers and duties as set forth in the
Bankruptcy Code.
The firm will be paid at these rates:
Francis J. Lawall Partner $935
Donald J. Detweiler Partner $895
Deborah Kovsky-Apap Partner $770
Marcy McLaughlin Smith Associate $525
Kenneth A. Listwak Associate $500
Susan M. Henry Paralegal $320
Monica A. Molitor Paralegal $320
Peggianne Hardin Paralegal $310
Donald Detweiler, Esq., a partner of Troutman Pepper, assured the
Court that the firm is a "disinterested person" as the term is
defined in Section 101(14) of the Bankruptcy Code.
In accordance with Appendix B-Guidelines for Reviewing Applications
for Compensation and Reimbursement of Expenses Filed under 11
U.S.C. Sec. 330 for Attorneys in Larger Chapter 11 Cases, Mr.
Detweiler disclosed that:
-- it has not agreed to any variations from, or alternatives
to, its standard or customary billing arrangements for this
engagement;
-- none of the professionals included in the engagement vary
their rate based on the geographic location of the bankruptcy
case;
-- the firm has not represented the Committee in the 12 months
prepetition; and
-- Troutman Pepper will work with the Committee to develop and
approve a prospective budget and staffing plan for Troutman
Pepper's engagement for the postpetition period as appropriate. The
budget may be amended as necessary to reflect changed or
unanticipated circumstances.
The firm can be reached through:
Donald J. Detweiler
Troutman Pepper Hamilton Sanders LLP
Hercules Plaza, 1313 Market Street
Suite 5100
Wilmington, DE 19801
Phone: 302-777-6524
Email: donald.detweiler@troutman.com
About Renovate America Inc.
Renovate America provides home improvement financing through its
industry-leading home financing product, Benji. It offers a
proprietary technology platform that helps Americans improve their
homes while giving contractors the tools they need to grow their
business. In addition to offering intuitive financing options,
Renovate America offers education, training and mentoring to
contractor teams in the field. On the Web:
http://www.renovateamerica.com/
Renovate America and two affiliates sought Chapter 11 protection
(Bankr. D. Del. Lead Case No. 20-13173) on Dec. 21, 2020.
Renovate America was estimated to have $50 million to $100 million
in assets and $100 million to $500 million in liabilities as of the
bankruptcy filing.
The Debtors tapped Bryan Cave Leighton Paisner LLP and Culhane
Meadows, PLLC as their bankruptcy counsel, Armanino LLP as
financial advisor, and GlassRatner Advisory & Capital Group, LLC as
restructuring advisor. Stretto is the claims agent.
On Jan. 4, 2021, the United States Trustee appointed the Committee
pursuant to section 1102(a) of the Bankruptcy Code. The Committee
tapped Troutman Pepper Hamilton Sanders LLP as its counsel.
ROMANS HOUSE: Seeks to Hire Levene Neale as Co‐Bankruptcy Counsel
-------------------------------------------------------------------
Romans House, LLC and its affiliate Healthcore System seek approval
from the U.S. Bankruptcy Court for the Northern District of Texas
to hire Levene, Neale, Bender, Yoo & Brill L.L.P., as their
co‐bankruptcy counsel.
The firm's services include:
a. continuing to take actions to effectuate the goals set
forth in paragraph 17 hereof;
b. taking necessary actions to protect and preserve the value
of the Debtors' estates, including by prosecuting bankruptcy
related actions on behalf of the Debtors, defending bankruptcy
related actions against the Debtors, negotiating the resolution of
any bankruptcy related actions commenced by or against the Debtors,
c. analyzing and, where appropriate, objecting to claims;
d. preparing, on behalf of the Debtors, all necessary motions,
applications, answers, orders, reports, and papers in connection
with the administration of the estates;
e. formulating, negotiating, and proposing a new plan of
reorganization; and
f. performing all other necessary legal services in connection
with these proceedings.
The firm will be paid at these rates:
David W. Levene 635
David L. Neale 635
Ron Bender 635
Martin J. Brill 635
Timothy J. Yoo 635
Gary E. Klausner 635
Edward M. Wolkowitz 635
David B. Golubchik 635
Beth Ann R. Young 620
Monica Y. Kim 620
Daniel H. Reiss 620
Richard P. Steelman, Jr. 620
Philip A. Gasteier 620
Eve H. Karasik 620
Todd A. Frealy 620
Kurt Ramlo 620
Juliet Y. Oh 605
Todd M. Arnold 605
Carmela T. Pagay 605
Anthony A. Friedman 605
Krikor J. Meshefejian 605
John-Patrick M. Fritz 605
Lindsey L. Smith 525
Jeffrey Kwong 525
Paraprofessionals 250
Levene Neale will also be reimbursed for reasonable out-of-pocket
expenses incurred.
Martin Brill, senior counsel of Levene Neale Bender Yoo & Brill
L.L.P., assured the Court that the firm is a "disinterested person"
as the term is defined in Section 101(14) of the Bankruptcy Code
and does not represent any interest adverse to the Debtor and its
estates.
The firm can be reached through:
Martin J. Brill, Esq.
Todd M. Arnold, Esq.
Levene, Neale, Bender, Yoo & Brill L.L.P.
10250 Constellation Blvd., Suite 1700
Los Angeles, CA 90067
Tel: (310) 229‐1234
Fax: (310) 229‐1244
Email: mjb@lnbyb.com
tma@lnbyb.com
About Romans House
Based in Forth Worth, Texas, Romans House, LLC operates Tandy
Village Assisted Living, a continuing care retirement community and
assisted living facility for the elderly in Fort Worth, Texas.
Affiliate Healthcore System Management, LLC, operates Vincent
Victoria Village Assisted Living, also an assisted living facility
for the elderly.
Romans House, LLC, and Healthcore System sought Chapter 11
protection (Bankr. N.D. of Tex. Case No. 19-45023 and 19-45024) on
Dec. 9, 2019. Romans House was estimated to have $1 million to $10
million in assets and liabilities while Healthcore was estimated to
have $1 million to $10 million in assets and $10 million to $50
million in liabilities.
The Hon. Edward L. Morris is the case judge.
Demarco Mitchell, PLLC, is the Debtors' legal counsel. Levene,
Neale, Bender, Yoo & Brill L.L.P., serves as their co‐bankruptcy
counsel.
SABLE PERMIAN: Amends Plan to Add Details on Liquidating Trust
--------------------------------------------------------------
Sable Permian Resources, LLC, and its affiliated debtors filed a
Third Amended Joint Plan and a Disclosure Statement on January 26,
2021.
The Third Amended Joint Plan added this paragraph: "On the
Effective Date, the Debtors shall take any and all actions as may
be necessary or appropriate to establish the Liquidating Trust and,
except as otherwise provided in this Plan, to cause the transfer
and assignment of the SPR-SPR OpCo Distribution Assets to the
Liquidating Trust. Upon the Effective Date, the Liquidating Trust
shall be vested with all right, title, and interest in the
respective SPR-SPR OpCo Distribution Assets, and such property
shall become the property of the Liquidating Trust free and clear
of all Claims, Liens, charges, other encumbrances and interests. It
is intended that the Liquidating Trust qualifies as a liquidating
trust under Treasury Regulations Section 301.7701-4(d) for U.S.
federal income tax purposes."
The sole beneficiaries of the Liquidating Trust shall be the
Liquidating Trust Beneficiaries. The proceeds of the SPR-SPR OpCo
Distribution Assets shall be held in trust by the Liquidating
Trustee and shall not be considered property of the Liquidating
Trust or of any Debtor's Estate. The Liquidating Trustee shall be
obligated to distribute the SPR SPR OpCo Distribution Assets and/or
the proceeds thereof to the Liquidating Trust Beneficiaries until
the earlier of such beneficiaries being repaid in full and ( the
SPR-SPR OpCo Distribution Assets being exhausted or otherwise
depleted; provided, that the SPR-SPR OpCo Distribution Assets may
be used by the Liquidating Trustee to (i) fund the expenses of the
Liquidating Trust as determined by the Liquidating Trustee in its
sole discretion and (ii) pay the fees and expenses of the Plan
Administrator in accordance with the Liquidating Trust Agreement
solely to the extent such fees and expenses are not required under
the Plan to be paid from Plan Administration Cash and/or
Reorganized Sable Land.
For U.S. federal income tax purposes, it is intended that the
Liquidating Trust Beneficiaries shall be treated as the grantors of
the Liquidating Trust and deemed to be the owners of the SPRSPR
OpCo Distribution Assets. Accordingly, it is intended for U.S.
federal income tax purposes that the transfer of SPR-SPR OpCo
Distribution Assets to the Liquidating Trust shall be deemed a
transfer to such beneficiaries by the applicable Debtors followed
by a deemed transfer by such beneficiaries to the Liquidating
Trust.
The Liquidating Trust shall be established for the primary purpose
of liquidating and distributing the SPR-SPR OpCo Distribution. In
particular, this includes: reviewing and reconciling, including
where appropriate objecting to, General Unsecured Claims against
SPR and SPR OpCo; reviewing, litigating, settling, dismissing, or
releasing any Retained Causes of Action transferred to the
Liquidating Trust; and liquidating and distributing the SPR-SPR
OpCo Distribution Assets in accordance with this Plan and the
Liquidating Trust Agreement.
The Committee shall select the Liquidating Trustee and its identity
shall be disclosed by the Debtors prior to the Combined Hearing. On
the Effective Date, the Liquidating Trustee shall be the sole
authorized representative and signatory of the Liquidating Trust,
with authority to render all services necessary to effectuate the
terms of this Plan as they relate to the Liquidating Trust. From
and after the Effective Date, the Liquidating Trustee shall be
deemed to have been appointed as the representative of each of the
Liquidating Debtors' Estates by the Bankruptcy Court for purposes
of the SPR-SPR OpCo Distribution Assets. The powers, authority,
responsibilities, and duties of the Liquidating Trustee shall be
governed by this Plan, the Confirmation Order, and the Liquidating
Trust Agreement.
Counsel for the Debtors:
HUNTON ANDREWS KURTH LLP
Timothy A. ("Tad") Davidson II
Joseph P. Rovira
Ashley L. Harper
600 Travis Street, Suite 4200
Houston, Texas 77002
Telephone: (713) 220-4200
Facsimile: (713) 220-4285
- and -
LATHAM & WATKINS LLP
George A. Davis
885 Third Avenue
New York, NY 10022
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
- and -
Caroline A. Reckler
Jeramy D. Webb
Brett V. Newman
Jonathan C. Gordon
330 North Wabash Avenue, Suite 2800
Chicago, IL 60611
Telephone: (312) 876-7700
Facsimile: (312) 993-9667
- and -
Jeffrey E. Bjork
Christina M. Craige
335 South Grand Avenue, Suite 100
Los Angeles, CA 90071
Telephone: (213) 485-1234
Facsimile: (213) 891-8763
About Sable Permian Resources
Sable Permian Resources, LLC and its affiliates sought protection
under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Tex. Lead Case
No. 20-33193) on June 25, 2020. At the time of the filing, Sable
Permian Resources disclosed assets of between $1 billion and $10
billion and liabilities of the same range. Judge Marvin Isgur
oversees the cases.
The Debtors tapped Latham & Watkins, LLP and Hunton Andrews Kurth
LLP as legal counsel, Alvarez & Marsal North America LLC as
financial advisor, Evercore Group LLC as investment banker, and
M-III Advisory Partners, LP, as financial advisor. Mohsin Y.
Meghji of M-III Advisory Partners is Debtors' chief restructuring
officer. Hilco Valuation Services, LLC, Hilco Real Estate
Appraisal, LLC, and Hilco Fixed Asset Recovery, LLC, are tapped as
liquidation analysis and valuation experts and sage-popovich, inc.
as a valuation expert.
The Office of the U.S. Trustee appointed a committee of unsecured
creditors on July 17, 2020. The committee has tapped Paul Hastings
LLP and Mani Little & Wortmann, PLLC, as its legal counsel, Conway
MacKenzie LLC as financial advisor, and Miller Buckfire & Co. LLC
and Stifel, Nicolaus & Co. Inc. as investment banker.
SEADRILL LTD: 9 of 12 Creditor Groups Extend Forbearance to Feb. 15
-------------------------------------------------------------------
Seadrill Limited (OSE:SDRL, OTCQX:SDRLF) announced Feb. 3, 2021,
that it has entered into a forbearance agreement with certain
creditors in respect of nine out of the group's twelve senior
secured credit facility agreements.
The purpose of the forbearance agreement is to allow the Company
and its stakeholders more time to finalise negotiations on the head
terms of a comprehensive restructuring of its balance sheet. Such
a restructuring may involve the use of a court-supervised process.
The Company continues to evaluate capital structure proposals from
its financial stakeholders; whilst no agreement has been reached at
this point it is expected that potential solutions will lead to
significant equitization of debt which is likely to result in
minimal or no recovery for current shareholders.
Pursuant to the forbearance agreement, the consenting creditors
have agreed not to exercise any voting rights to, or otherwise take
actions, in respect of certain events of default that may arise
under those senior secured credit facility agreements as a result
of the group not making certain interest payments, until and
including the earlier of 15 February 2021 and any termination of
the forbearance agreement.
Forbearance has not yet been agreed with respect to certain events
of default or termination events that may arise under the three
remaining senior secured credit agreements, the Company's New
Secured Notes, leasing arrangements for the West Hercules, West
Linus and West Taurus and a bilateral guarantee facility with
Danske Bank. Without a forbearance in respect of these
arrangements, a non-payment of interest or other amounts due under
the senior secured credit agreements, the Company's New Secured
Notes and/or the leasing arrangements could result in the creditors
under these arrangements having the right to accelerate or
otherwise enforce their rights under them.
About Seadrill Ltd.
Seadrill Limited (OSE:SDRL, OTCQX:SDRLF) --
http://www.seapdrill.com/-- is a deepwater drilling contractor
providing drilling services to the oil and gas industry. As of
March 31, 2018, it had a fleet of over 35 offshore drilling units
that include 12 semi-submersible rigs, 7 drillships, and 16 jack-up
rigs.
On Sept. 12, 2017, Seadrill Limited sought Chapter 11 protection
after reaching terms of a reorganization plan that would
restructure $8 billion of funded debt. It emerged from bankruptcy
in July 2018.
Demand for exploration and drilling has fallen further during the
COVID-19 pandemic as oil firms seek to preserve cash, idling more
rigs and leading to additional overcapacity among companies serving
the industry.
In June 2020, Seadrill wrote down the value of its rigs by $1.2
billion and said it planned to scrap 10 rigs.
Seadrill is presently in talks with lenders on a restructuring of
its $5.7 billion bank debt.
SERTA SIMMONS: Moody's Completes Review, Retains Caa3 CFR
---------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Serta Simmons Bedding, LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 22, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Serta Simmons' CFR Caa3 reflects Moody's concerns regarding the
sustainability of the company's debt capital structure given the
company's substantial pro forma and projected leverage, and
aggressive financial policy under private equity ownership, evident
by the $670 million debt financed dividend paid in 2016 and its
continued high financial leverage. The rating is also constrained
by the company's declining earnings trend prior to the onset of the
coronavirus and the challenges to executing a material earnings
turnaround amid weak economic conditions and growing competition
from emerging digital selling channels and new entrants. The
company is vulnerable to weakness in cyclical consumer spending.
Positive consideration is given to Serta Simmons' solid scale with
revenue of about $1.9 billion, leading market share, well-known
brand names and product development capabilities. The additional
liquidity from a recent debt raise also provides the company
greater flexibility to manage in the current downturn.
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
SHARPE CONTRACTORS: Gets Cash Collateral Access on Final Basis
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Georgia,
Atlanta Division, has authorized Sharpe Contractors, LLC to use
cash collateral in accordance with the budget on a final basis.
The Debtor is authorized to use the Cash Collateral in accordance
with the Budget with a 10% variance, and for payment of U.S.
Trustee fees or for other matters pursuant to orders entered by the
Court, except that the Debtor will pay the actual amount owed to
any utility or any insurance payments. The Debtor may not use line
item budgeted amounts on a cumulative basis.
The Debtor is working on two projects for related companies AVR
Atlanta Hotel, LLC and AVR Hotel NW Tenant, LLC. These two projects
are described in the Debtor's Motion as the Marriott Ballroom
Project and the Springhill Project.
The Debtor provides monthly pay requests to AVR that are broken
down into two categories: subcontractors/vendors and the fees paid
to the Debtor for its services as construction manager. AVR pays
the subcontractors via a "two-party" check system in which AVR
makes the check payable to both the subcontractor or vendor owed
and the Debtor. The Debtor determines that the invoice from the
Sub is in the appropriate amount and endorses the check to the Sub.
No party objected to the Debtor and AVR continuing to ensure Subs
are paid in this manner. The Debtor and AVR are authorized to
continue using the two-party check system as they did prior to the
Petition Date, and AVR is authorized to continue paying monthly pay
requests as remitted by the Debtor pursuant to the contract between
the parties.
Because Bank of America, N.A., Selective Insurance Company of
America, American Funding Services, Inc., Alfa Advance Funding,
LLC, 24 Capital, LLC, and Ridge Group, may have an interest in
revenue and profits which may constitute cash collateral, the Order
provides they are granted a valid, attached, choate, enforceable,
perfected and continuing security interest in, and liens upon all
post-petition assets of the Debtor of the same character, type, to
the same nature, extent and validity as the liens and encumbrances
of such lender in the Debtor's pre-petition assets.
As adequate protection for Bank of America's interest in Cash
Collateral, the Debtor will pay to Bank of America $2,500 on or
before February 10 and on the 10th of each month thereafter until a
confirmation order is entered in the case. If the adequate
protection is found to be inadequate, Respondents will have the
right to assert and seek payment of an administrative expense
priority claim under 11 U.S.C. section 507(b) to the extent of any
diminution in value of the cash collateral.
A copy of the Final Order is available for free at
https://bit.ly/39JPJ66 from PacerMonitor.com.
About Sharpe Contractors
Sharpe Contractors, LLC, filed a Chapter 11 bankruptcy petition
(Bankr. N.D. Ga. Case No. Case 20-72638) on Dec. 14, 2020. In the
petition signed by Shane Sharpe, president, the Debtor disclosed up
to $500,000 in assets and up to $10 million in liabilities.
Judge Paul Baisier oversees the case.
Will B. Geer at Wiggam & Greer, LLC, is the Debtor's counsel.
SILGAN HOLDINGS: Fitch Assigns First-Time 'BB+' LongTerm IDR
------------------------------------------------------------
Fitch Ratings has assigned Silgan Holdings Inc. a first-time 'BB+'
Long-Term Issuer Default Rating (IDR). In addition, Fitch has
assigned senior secured ratings of 'BBB-'/'RR1' and senior
unsecured ratings of 'BB+'/'RR4'. The Rating Outlook is Stable.
The ratings reflect the company's leading positions within the
North American metal food and rigid plastic container markets, its
growing closures segment, as well as stable end markets, history of
positive FCF generation, and adherence to a 2.5x-3.5x net debt
financial policy post-acquisitions. Fitch expects Silgan to
generate annual FCF, after dividends and working capital, in the
$250 million to $350 million range over the next several years,
which will allow a reduction in leverage from the 4.2x gross
debt/EBITDA (3.7x net) estimated at YE 2020 to under 3.5x
(approaching 3.0x net) at YE 2022. Credit concerns include
management's strategy to fund additional closures acquisitions with
debt and the potential for shareholder pressure to increase
returns. Fitch recognizes, however, the credit is supported by
management's long-standing conservative financial policies, which
Fitch expects will continue to accommodate modestly-sized M&A and
shareholder return activity.
KEY RATING DRIVERS
Leadership in Core Markets: Silgan's ratings are supported by its
large scale and dominant positions in stable end markets, with the
#1 share (more than half) of the North American metal food
container segment, and leading positions in the rigid plastic
container and closures markets. Annual revenue is approaching $5
billion, placing Silgan amongst the largest global packaging
companies.
Silgan's core customers include leaders in the food and consumer
industries, including Campbell Soup, Del Monte, Kraft Heinz,
Nestle, and P&G. Silgan has on or near-site facilities with a
majority of its metal container customers, creating barriers to
prospective new entrants. Long-term arrangements covering
approximately 90% of metal can sales and the majority of closures
and plastic containers sales provide a measure of visibility to
Silgan's businesses. However, the company is exposed to essentially
0%-2% underlying growth trends across much of the cans and plastic
containers segments. Silgan has a long history of renewing major
customer contracts.
Consistent FCF Generation: Silgan generates consistently positive
FCF, averaging 5% of revenues, which is supported by stable EBITDA
margins in the 14% to 15% range, and the nondiscretionary and
predictable nature of end-market demand in food, beverage, and home
and personal care.
Margin risk stemming from raw materials costs, predominately steel
and resins, are partially mitigated by pass-through agreements with
long-term customers. Capex requirements are modest, at 4%-5% of
sales, further supporting FCF generation. Due to seasonality in the
metal can business, FCF generation is concentrated in the fourth
quarter; however, Fitch expects Silgan to maintain sufficient
liquidity through availability under a committed $1.2 billion
revolving credit facility.
Acquisition Led Growth: Silgan will likely continue to allocate
capital toward M&A in the higher margin and higher growth closures
segment, where the company has completed two significant
transactions (WestRock and Albea) in the past three years. The
company has grown via over 35 acquisitions since incorporation in
1987.
Fitch believes that closures acquisitions are likely to be
modestly-sized relative to Silgan as a whole, as the size of
companies in the universe of targets is modest compared to Silgan's
increasing scale. M&A strategy could be constrained by high
valuations across many target companies, driven by the growing move
toward consolidation in this segment. Silgan typically seeks to
realize synergies in procurement, supply chain, and SG&A
efficiencies.
Commitment to Conservative Credit Metrics: Silgan management
maintains a clear and long-standing year-end net debt leverage
target range of 2.5x to 3.5x, a policy that Fitch believes is
credible, and accommodated by stable cash flows and modest cash
payouts to equity investors. Silgan has operated within this range
for almost 20 years through multiple acquisitions and economic
cycles.
Fitch expects that through the forecast period, Silgan will
maintain a modest dividend payout, representing less than 10% of
EBITDA, and will continue to utilize share buybacks sparingly.
Additional borrowing stemming from acquisitions may on occasion
breach the upper limit of the leverage target, although Fitch
expects the company will return to the stated range within 18-24
months. Fitch estimates that Silgan's total debt to EBITDA at YE
2020 will be approximately 4.2x, which Fitch forecasts will drop to
below 3.5x by mid-year 2022. Fitch believes capital allocation will
remain skewed toward M&A over cash shareholder returns through the
forecast period.
Moderating Post-Pandemic Performance: Silgan benefitted during 2020
from the stay-at-home economy, resulting in elevated volumes and
record EBITDA generation. Fitch expects that end-market demand will
normalize through 2021 as pandemic related dislocations abate, and
that subsequently Silgan's performance will return to pre-pandemic
levels of growth.
Fitch expects metal and plastic container volumes to settle back to
flat to +2% growth by 2022, partially offset by improving volumes
in closures, where there is exposure to certain beverages, beauty
and fragrance end markets which have been negatively impacted by
pandemic restrictions, and which will see some rebound.
DERIVATION SUMMARY
Although Silgan is smaller by revenue and EBITDA than Berry (BB+),
Crown (NR) and Ball (NR), and similar in size to Sealed Air (NR),
Fitch believes that all companies in this tier have considerable
scale, and purchasing and production efficiencies. Silgan, along
with Berry and other peers, realizes the majority of sales from
stable and non-cyclical consumer end-markets. Fitch also believes
Silgan's dominance in the U.S. metal container segment is a
positive rating factor, and is comparable to Crown and Ball's
dominant positioning within metal beverage cans, to Berry's leading
positions across the broad array of product segments in which it
competes, and to Sealed Air's leadership in food protection. Silgan
realizes a smaller proportion of revenues from non-U.S. countries
than peers (30% for Silgan vs 41% Sealed Air and 65% for Crown),
and has somewhat lower growth potential afforded by exposure to
emerging markets, although Fitch believes that for large
diversified packaging companies end market diversification is a
more important than geographic diversification.
Silgan's EBITDA margins are at the lower end of a tight peer range
in the mid-teens, although Fitch views its FCF margin, in the 5%
range, as comparable to peers', and reflective of effective cost
pass through mechanisms via arrangements with customers, modest
capex requirements. Silgan's durability of cash flows through
economic and commodity cycles is strong, and compares favorably
with the peer group.
Silgan compares favorably to similarly rated peers in terms of
leverage and capital allocation policy. Silgan's net debt target,
in the 2.5x-3.5x range, is slightly tighter than Berry, Sealed Air
and Crown, all of which operate in a wider 3.5x to 4.0x range.
Silgan and its peers are in various stages of deleveraging
following recent acquisitions. Fitch views M&A is an integral part
of strategy for most companies in the consolidating packaging
sector, and Fitch assumes Silgan and peers are able to operate
within their respective ranges, post-acquisition, in roughly 18-24
month time horizons. Silgan's capital allocation policies are also
conservative versus peers; Silgan's dividend payout ratio equates
to approximately 7% of EBITDA, while Sealed Air has historically
returned approximately 14% of EBITDA to shareholders via dividends.
Berry does not pay a common dividend, but has been more aggressive
in leveraging its balance sheet in pursuit of M&A than has Silgan.
Crown has announced it will begin to pay a dividend of around 6.5%
of EBITDA, and pursue share repurchases going forward. Silgan has
been more conservative than most peers in pursuing opportunistic
share repurchases.
KEY ASSUMPTIONS
-- End markets normalize to pre-pandemic levels in 2021/2022,
with slower growth in cans and plastic containers, and
recovery in fragrances and other markets negatively impacted
by the pandemic;
-- Dividend payout maintained at current levels; no share
repurchases;
-- Capex as per management;
-- Excess cash flow utilized to pre-pay bank and bond debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Demonstrated commitment toward maintaining a Total Debt with
Equity Credit/Operating EBITDA below 3.5x on a sustained
basis, supported by a clear and credible financial policy;
-- Credit conscious implementation of the company's M&A strategy
while maintaining or enhancing cash flow consistency;
-- Transition to a less encumbered balance sheet.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total Debt with Equity Credit/Operating EBITDA above 4.0x on a
sustained basis, or a weakening of existing leverage
targeting;
-- A debt funded acquisition which is not accommodated within
existing financial policies, does not have a clear
deleveraging path within 24 months, or which materially
changes the predictability of cash flows.
-- A change in capital allocation policies that prioritizes
shareholder returns over deleveraging.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch expects Silgan to have adequate liquidity
to meet its financial commitments over the forecast period. Fitch
expects Silgan to generate over $550 million in FFO annually, which
comfortably covers annual capex of around $250 million, annual
common dividends of $45 million, and debt amortization obligations
of around $93 million.
A $1.2 billion multi-currency revolving credit facility (maturing
in May 2023) had full availability as of Dec. 31,2020, in addition
to cash of $194 million. The revolving credit facility typically
provides sufficient liquidity to cover seasonal working capital
requirements. Silgan's seasonal usage of the facility can be
significant during the third quarter, driven by the fruit and
vegetable canning business. Typically, Silgan can have up $400
million drawn on its R/C during this time, which is usually paid
down by the end of year. Liquidity during peak borrowing season is
usually over $900 million, with approximately $800 million of
capacity within the revolver and an additional $100 million or more
in cash.
Manageable Debt Maturities: The credit agreement dated March 2017
was amended in May 2018 to extend the maturities of the U.S. and
Canadian term loans and revolving credit facilities and reduce the
interest rates on the instruments. Fitch expects mandatory
amortization payments for credit facilities will be manageable
given expected positive FCF generation. The next large maturity
occurs in 2024, with approximately $440 million of senior term debt
comes due. Fitch does not view refinancing risk as a material risk
to the credit, given demonstrated lender support for the company
and strong FCF generation.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SILVERLINER LLC: Gets Cash Collateral Access Thru Feb. 28
---------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Kentucky,
Pikeville Division, has authorized Silverliner LLC to use cash
collateral on an interim basis through February 28, 2021, in
accordance with a budget.
The Debtor is authorized to make expenditures in accordance with
the Budget. The Court order provides a carve-out for professional
fees for the Debtor's counsel in February 2021 as set forth on the
Budget.
As continuing adequate protection for any diminution in the value
of creditors' interests in the Cash Collateral, the Cash Collateral
Creditors are afforded the same terms of adequate protection
granted per the Court's August 4th Cash Collateral Order. As
further adequate protection, the Debtor will pay Citizens Bank the
monthly February adequate protection payment set forth on the
Budget.
The Debtor is authorized and directed to execute and comply with
the terms of the Order, and are further authorized to use Cash
Collateral under all of the terms and conditions provided in the
Order.
A copy of the Order is available at https://bit.ly/3cDSd80 from
PacerMonitor.com.
About Silverliner LLC
Silverliner LLC -- https://silverliner.com -- is a tank
manufacturer in Pikeville, Kentucky. It sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. E. D. Ky. Case. No.
20-70314. In the petition signed by David C. Tomlinson, member, the
Debtor disclosed $8,980,590 in assets and $6,683,199 in
liabilities.
Judge Gregory R. Schaaf oversees the case.
Jamie L. Harris, Esq. at DELCOTTO LAW GROUP PLLC is the Debtor's
counsel.
SITO MOBILE: Genova Burns Approved as New Counsel
-------------------------------------------------
Sito Mobile Solutions, Inc., sought and obtained permission from
the U.S. Bankruptcy Court for the District of New Jersey to employ
Genova Burns LLC as its Chapter 11 counsel.
When it filed for bankruptcy, Sito hired Daniel M. Stolz, Esq., and
his team at Wasserman, Jurista & Stolz, P.C. as counsel. The firm
has recently merged into Genova Burns. The Debtors want to
continue to hire Wasserman's Stolz, Steven Z. Jurista, Esq., Scott
S. Rever, Esq. and Donald W. Clarke, Esq., who have joined Genova
Burns.
Genova Burns will render these services:
a. advising the Debtors with respect to the power, duties and
responsibilities in the continued management of the financial
affairs as a debtor, including the rights and remedies of the
debtor-in-possession with respect to its assets and with respect to
the claims of creditors;
b. advising the Debtors with respect to preparing and
obtaining approval of a Disclosure Statement and Plan of
Reorganization;
c. preparing on behalf of the Debtors, as necessary,
applications, motions, complaints, answers, orders, reports and
other pleadings and documents;
d. appearing before the Bankruptcy Court and other officials
and tribunals, if necessary, and protecting the interests of the
Debtors in federal, state and foreign jurisdictions and
administrative proceedings;
e. negotiating and preparing documents relating to the use,
reorganization and disposition of assets, as requested by the
Debtors;
f. negotiating and formulating a Disclosure Statement and Plan
of Reorganization;
g. advising the Debtors concerning the administration of its
estate as a debtor-in-possession; and
h. performing other legal services for the Debtors, as may be
necessary and appropriate.
Genova Burns will charge for its services at these hourly rates:
Partners $450 - $850
Counsel $350 - $550
Of Counsel $500 - $600
Associates
(by years of experience)
1 $225
2-6 $275
7-8 $300
9+ $325
Paralegals $200
Genova Burns attests that it does not hold an adverse interest to
the Debtors' estate, and is a disinterested person as that term is
defined under 11 U.S.C. section 101(14).
The firm may be reached at:
Daniel M. Stolz, Esq.
GENOVA BURNS LLC
110 Allen Road, Suite 304
Basking Ridge, NJ 07920
Tel: (973) 467-2700
About SITO Mobile
SITO -- https://www.sitomobile.com -- is a developer of customized,
data-driven solutions for brands spanning strategic insights and
media. The platform reveals a deeper and more meaningful
understanding of customer interests, actions and experiences
providing increased clarity for clients when it comes to navigating
business decisions.
Jersey City, N.J.-based Sito Mobile Ltd., and its affiliates SITO
Mobile Solutions, Inc., and SITO Mobile R&D IP, LLC, filed Chapter
11 petitions (Bankr. D.N.J. Case Nos. 20-21435, 20-21436 and
20-21437) on October 8, 2020. The petitions were signed by CEO
Thomas Candelaria.
Sito Mobile Ltd.'s declared total assets at $0 and total
liabilities at $21,027,306. SITO Mobile Solutions declared total
assets at $592,565 and total liabilities at $21,019,306. SITO
Mobile R&D declared total assets at $2,674,944 and total
liabilities at $19,727,206.
The Debtors hired Daniel M. Stolz, Esq., at Wasserman, Jurista &
Stolz, P.C. as counsel. In January 2021, Wasserman, Jurista &
Stolz was merged into Genova Burns in anticipation of a surge of
midsized clients facing bankruptcies and restructurings. The
Debtors are now represented by Genova Burns, LLC.
The Official Committee of General Unsecured Creditors is
represented by lawyers at Perkins Coie LLP.
SOUTHWESTERN ENERGY: Fitch Affirms 'BB' LT IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed Southwestern Energy Company's Long-Term
Issuer Default Rating (IDR) at 'BB'. In addition, Fitch has
affirmed the company's senior secured revolver at 'BBB-'/'RR1' and
senior unsecured notes at 'BB'/'RR4'. The Rating Outlook has been
revised to Stable from Negative.
Southwestern's ratings are supported by its flexible production
profile and increasing liquids mix, favorable near-term hedging
program, increased scale and synergies from the Montage
acquisition, manageable midstream commitments, and extended
maturity profile. These factors are offset by current leverage
metrics slightly outside of 'BB' rating tolerances and the
inability to generate material cash flow under Fitch's base case
price deck.
The Outlook revision to Stable reflects Fitch's belief that the
Montage acquisition has been successfully integrated. In addition,
near-term leverage metrics are expected to improve to 'BB' rating
tolerances over the forecast under Fitch's base case price deck,
and current Strip pricing assumptions. Southwestern has proven its
ability to access debt capital markets and has sufficient runway in
addressing debt maturities.
KEY RATING DRIVERS
Credit-Conscious Acquisition: Fitch views the stock-for-stock
nature of the Montage acquisition, and the retirement of the
Montage notes with equity proceeds, positively. However, Fitch
believes it is relatively neutral to the credit profile. The
transaction increases total net acres by 70%, total production by
25% and total proved reserves at YE 2019 by 21%. Fitch expects the
transaction will add meaningful size and scale, bring G&A cost
reductions per Mcfe, and should provide additional in-basin
diversification while limiting operational commitments and
maintaining a clear maturity runway.
Clear Maturity Profile: Southwestern's maturity schedule remains
light with no material near-term debt maturities outside of $207
million due March 2022, which the company expects to pay down with
FCF. The revolver, which is due in March 2024, is less than 50%
drawn but could grow if FCF generation is below expectations. Fitch
believes the maturity profile supports management's development
timeline and associated production growth should help moderate
near-term pricing impacts on the borrowing base.
FCF Pivot: Fitch's base case forecasts FCF to be neutral to
slightly positive in 2021 and 2022, assuming a base case Henry Hub
price of $2.45/Mcf in both years. Current strip prices are more
supportive of positive FCF and Fitch estimates approximately $300
million of FCF in 2021 based on $2.75/mcf strip price. Leverage
metrics are expected to remain slightly elevated in 2021 but are
forecast to migrate toward 3.0x on a mid-cycle basis thereafter,
within Fitch's 'BB' rating sensitivities.
Hedges Provide Near-Term Support: Southwestern has hedged
approximately 84% of its 2021 expected natural gas production at
$2.60 and 41% of its 2022 production at $2.53. In addition,
approximately two-thirds of its liquid production is hedged in
2021. Management's strategy is to hedge approximately 50%-90% of
its expected production over the next twelve months and 30%-50% of
production over the following twelve months. Fitch believes
Southwestern's hedging program is strong, but is not quite as
robust as some Appalachian producers in terms of multi-year hedges.
Hedges in 2021 provide liquidity uplift and increased certainty of
moving to FCF neutrality.
Robust Appalachian Footprint: Southwestern has a large Appalachian
footprint with approximately 786,000 net acres and 15.5 Tcfe of
proved reserves pro forma for the Montage acquisition. The company
also has approximately 5,150 drilling locations, which provides for
a deep inventory. Natural gas production approximates for 79% of
total production, although the company has an ability to increase
production of NGL production when prices are attractive. Fitch
believes the Southwest Appalachian acreage continues to deliver
favorable operational results and believes development spending in
its liquids-weighted region combined with the recovery in NGL
pricing should help support netbacks.
DERIVATION SUMMARY
Pro-forma for the transaction, Southwestern remains one of the
largest U.S. natural gas E&P companies at approximately 3.0 Bcfe
per day (Bcfe/d), larger than CNX Resources' (CNX; BB/Positive),
but below EQT Corporation (EQT; BB/Positive) at 4.0. Pro-forma
mid-cycle leverage of slightly over 3.0x ranks similar to
'BB-rated' peers EQT (3.0x) and CNX (3.3x) in 3Q20.
Fitch-calculated unhedged cash netback margin of $0.05 is in-line
with EQT ($0.04) but well below CNX at $0.34 and Comstock at
$0.47.
Southwestern's three-year rolling hedge policy covers 84% of 2021
gas production and roughly 41% of 2022 forecast gas production.
This is less than CNX's 90% of gas production hedged for2021, but
stronger than EQT (72%). Fitch believes the company's hedging
program provides greater certainty in achieving positive FCF in
2021 under Fitch's base case prices.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- WTI oil price of $42.00/bbl in 2021, $47.00/bbl in 2022,
$50.00/bbl in 2023 and in the long term;
-- Henry Hub natural gas price of $2.45/mcf through the forecast;
-- Production of 3.1 Bcfe/d in 2021 and 2022 and 3.2 Bcfe/d in
2023;
-- Liquids mix of 19% in 2021 and throughout the forecast;
-- Capex above $890 million in 2021 and $840 million to $850
million for the remainder of the forecast.
-- Revolver borrowings used to fund cash shortfalls;
-- No material M&A activity or shareholder activity.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Improved netbacks that lead to significant through-the-cycle
FCF;
-- Mid-cycle debt/EBITDA below 2.5x or FFO-Adjusted Leverage
below 2.75x on a sustained basis;
-- Demonstrated commitment to stated financial policy;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Mid-cycle debt/EBITDA above 3.0x or FFO-Adjusted Leverage
above 3.25x on a sustained basis;
-- Operational and financial plan that fails to execute on
Southwest Appalachia development and support FCF neutrality;
-- Weakening in differential trends and the unit cost profile.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Southwestern's liquidity consists of $95
million of cash on hand and an undrawn $2.0 billion secured credit
facility as of 3Q20 (approximately $1.6 billion available after
$203 million in letters of credit). The borrowing base and elected
commitments were re-determined to $1.8 billion in April 2020 but
later increased to $2.0 billion following the Montage acquisition.
Financial covenants under the credit facility include a minimum
current ratio (including unused commitments under the credit
agreement) of 1.0x and a maximum total net leverage ratio of no
greater than 4.00x after June 30, 2020. As of Sept. 30th, 2020,
Southwestern was in compliance with all of its covenants. Fitch
believes the company has sufficient covenant headroom, but realizes
that the leverage profile could be pressured in a prolonged weak
commodity price environment. The company is able to fund the $207
maturity in 2022 with revolver borrowings at maturity. The next
material bond maturity is not until 2025.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SPANISH HEIGHTS: Case Summary & 3 Unsecured Creditors
-----------------------------------------------------
Debtor: Spanish Heights Acquisition Company, LLC
5148 Spanish Heights Drive
Las Vegas, NV 89148-1422
Chapter 11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
District of Nevada
Case No.: 21-10501
Debtor's Counsel: James D. Greene, Esq.
GREENE INFUSO, LLP
3030 South Jones Boulevard
Suite 101
Las Vegas, NV 89146
Tel: (702) 570-6000
E-mail: JGreene@greeneinfusolaw.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $0 to $50,000
The petition was signed by Jay Bloom, as manager and owner of SJC
Ventures Holdings, LLC.
A copy of the petition containing, among other items, a list of the
Debtor's three unsecured creditors is available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/RZCOMWY/ACQUISITION_COMPANY_SPANISH_HEIGHTS__nvbke-21-10501__0001.0.pdf?mcid=tGE4TAMA
SPHERATURE INVESTMENTS: Two Creditors Out as Committee Members
--------------------------------------------------------------
The U.S. Trustee for Region 6 disclosed in a notice filed with the
U.S. Bankruptcy Court for the Eastern District of Texas that as of
Feb. 3, these creditors are the remaining members of the official
committee of unsecured creditors in the Chapter 11 cases of
Spherature Investments LLC and its affiliates:
1. Christine Villar
FSP Legacy Tennyson Center, LLC
401 Edgewater Place, Suite 200
Wakefield, MA 01880
Tel: 781-557-1377
E-mail: Cvillar@fspreit.com
2. Melody Yiro
c/o Lindemann Law Firm
433 N. Camden Drive, 4th Floor
Beverly Hills, CA 90210
Tel: 310-279-5269
E-mail: blake@lawbl.com
3. David Watson
9029 S. Yosemite #2303
Lone Tree, CO 80124
Tel: 507-312-0290
E-mail: Davewatson22@hotmail.com
Peter Powderham and Efrosyni Adamides were previously identified as
members of the creditors committee. Their names no longer appear
in the new notice.
About Spherature Investments
Spherature Investments LLC and its affiliates, including
WorldVentures Marketing, LLC, sought Chapter 11 protection (Bankr.
E.D. Texas Lead Case No. 20-42492) on Dec. 21, 2020.
WorldVentures Marketing -- http://worldventures.com-- sells travel
and lifestyle community memberships providing a diverse set of
products and experiences.
At the time of the filing, Spherature Investments estimated $50
million to $100 million in assets and liabilities.
The Hon. Brenda T. Rhoades is the case judge. The Debtors tapped
Foley & Lardner, LLP as counsel and Larx Advisors, Inc. as
restructuring advisor. Stretto is the claims agent.
The U.S. Trustee for Region 6 appointed an official committee of
unsecured creditors on Jan. 22, 2021.
SPI ENERGY: Issues $4.21M 10% Convertible Promissory Note
---------------------------------------------------------
SPI Energy Co., Ltd. has issued a $4.21 million 10% convertible
promissory note to Streeterville Capital, LLC, a Utah limited
liability company.
The convertible promissory note, which was approved by SPI's board
of directors, bears interest at the rate of 10% per annum and has a
maturity date of Jan. 31, 2022. All or any portion of the note is
convertible into ordinary shares of SPI at a conversion price of
$20.00 per share. The convertible promissory note was issued in a
private placement in reliance on Regulation D promulgated under the
Securities Act of 1933, as amended.
About SPI Energy Co., Ltd.
SPI Energy -- http://www.spigroups.com-- is a global provider of
photovoltaic solutions for business, residential, government and
utility customers, and investors. The Company develops solar PV
projects that are either sold to third party operators or owned and
operated by the Company for selling of electricity to the grid in
multiple countries in Asia, North America and Europe. The
Company's subsidiary in Australia primarily sells solar PV
components to retail customers and solar project developers. The
Company has its US headquarters in Santa Clara, California and
maintains global operations in Asia, Europe, North America and
Australia. SPI is also targeting strategic investment
opportunities in green industries such as battery storage and
charging stations, leveraging the Company's expertise and growing
base of cash flow from solar projects and funding development of
projects in agriculture and other markets with significant growth
potential.
SPI Energy reported a net loss attributable to shareholders of the
Company of $15.26 million for the year ended Dec. 31, 2019,
compared to a net loss attributable to shareholders of the Company
of $12.28 million for the year ended Dec. 31, 2018.
Marcum Bernstein & Pinchuk LLP, in Beijing China, the Company's
auditor since 2018, issued a "going concern" qualification in its
report dated June 29, 2020, citing that the Company has a
significant working capital deficiency, has incurred significant
losses and needs to raise additional funds to meet its obligations
and sustain its operations. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
STEINWAY MUSICAL: Moody's Completes Review, Retains B2 Rating
-------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Steinway Musical Instruments, Inc. and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review discussion held on January 20,
2021 in which Moody's reassessed the appropriateness of the ratings
in the context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Steinway's credit profile (B2) is supported by its strong brand
recognition, high product quality, and global revenue base. Also
considered a positive credit consideration is the company's history
of maintaining relatively modest debt-to-EBITDA leverage, at below
4.0x. Key credit concerns include the highly discretionary nature
of consumer demand for the company's high-end piano products along
with the company's narrow product focus. Steinway is also
inherently exposed to event risk under hedge fund ownership, which
is the most meaningful Environmental, Social and Governance (ESG)
consideration. The company is controlled by John Paulson,
Steinway's majority shareholder, which creates event risk. Partly
mitigating this concern is management's demonstrated adherence to a
relatively modest leverage position.
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
STREBOR SPECIALTIES: March 9 Plan Confirmation Hearing Set
----------------------------------------------------------
On Dec. 14, 2020, debtor Strebor Specialties LLC filed with the
U.S. Bankruptcy Court for the Southern District of Illinois a Plan
of Reorganization and a Disclosure Statement. On January 26, 2021,
Judge Laura K. Grandy approved the Disclosure Statement and ordered
that:
* March 9, 2021, at 9:00 a.m., in U.S. Bankruptcy Court,
Melvin Price US Courthouse, 750 Missouri Ave, East St Louis, IL
62201 is the hearing for the consideration of confirmation of the
Plan of Reorganization.
* Acceptances or rejections of their Plan shall be submitted
to the Debtor's attorney, Steven M. Wallace, on or before seven
days prior to the date of hearing on confirmation of said Plan.
* Any objection to confirmation of the Plan shall be filed on
or before seven days prior to the date of the hearing on
confirmation of the Plan, with a copy to the attorney for the
debtor.
* Any complaints objecting to discharge shall be filed no
later than the first date set for hearing on confirmation of the
plan.
* At least three days prior to the day of the confirmation
hearing, the attorney for debtor shall file with the Court the
creditors' ballots separated by class and a short written statement
demonstrating that the statutory requisites have been met for
confirmation.
A full-text copy of the order dated Jan. 26, 2021, is available at
https://bit.ly/36Ck0ls from PacerMonitor.com at no charge.
Attorneys for the Debtor:
Steven M. Wallace
Silver Lake Group, Ltd.
6 Ginger Creek Village Drive
Glen Carbon, Illinois 62034
Tel: (618) 692-5512
E-mail: steve@silverlakelaw.com
About Strebor Specialties
Strebor Specialties, LLC, is a Dupo, Illinois-based small to medium
liquid filler with capabilities to do aerosol, liquid, and oil
filling. Strebor Specialties sought bankruptcy protection (Bankr.
S.D. Ill. Case No. 20-30262) on March 10, 2020. The petition was
signed by its manager, Otto D. Roberts, Jr. At the time of the
filing, the Debtor disclosed total assets of $1,031,229 and total
liabilities of $6,285,898. The Debtor tapped Steven M. Wallace of
Silver Lake Group, Ltd., as its attorney.
SUMMIT HOTELS: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Summit Hotels, LLC
400 Venture Drive, Suite B
Lewis Center, OH 43035
Business Description: Summit Hotels, LLC is a privately-held
company whose principal assets are
located at 655 North 108th Avenue Omaha, NE
68154.
Chapter 11 Petition Date: February 2, 2021
Court: United States Bankruptcy Court
District of Nebraska
Case No.: 21-80092
Judge: Hon. Brian S. Kruse
Debtor's Counsel: Patrick R. Turner, Esq.
TURNER LEGAL GROUP, LLC
139 S. 144th Street
Omaha, NE 68010
Tel: 402-690-3675
E-mail: pturner@turnerlegalomaha.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Jatin Batra, the authorized member.
A copy of the petition containing, among other items, a list of the
Debtor's 20 largest unsecured creditors is available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/544XV6I/Summit_Hotels_LLC__nebke-21-80092__0001.0.pdf?mcid=tGE4TAMA
TALK VENTURE: Wells Fargo Says Amended Plan Unconfirmable
---------------------------------------------------------
Secured creditor Wells Fargo Bank objects to the Amended Disclosure
Statement of Talk Venture Group, Inc.
According to Wells Fargo, the Amended Disclosure Statement again
falls woefully short of the requirement that it provide adequate
information necessary to enable Secured Creditor Wells Fargo Bank,
or any other creditors of Debtor, to make an informed decision
about the Amended Plan.
Specifically, there is still no information about how and why the
Debtor, Talk Venture Group, Inc. determined what portion of a
Wells' second lien priority claim is secured when unequivocally
junior creditors are being provided partially secured claims, how
and why the Debtor determined what collateral each secured claimed
attached to and how the Debtor proposes to pay its principal when
neither the plan projections nor the monthly operating reports
indicate the Debtor will have sufficient income.
Finally, the Amended Plan is patently unconfirmable because the
Debtor's principal's waiver of his alleged administrative claim and
proposed "new value" still does not meet the requirements or the
absolute priority rule.
Attorneys for WELLS FARGO BANK, N.A.:
RAFFI KHATCHADOURIAN
HEMAR, ROUSSO & HEALD, LLP
15910 Ventura Boulevard, 12th Floor
Encino, California 91436
Telephone: (818) 501-3800
Facsimile: (818) 501-2985
About Talk Venture Group
Talk Venture Group, Inc., sells a variety of products, including
baby safety products, auto towing straps, security surveillance
cameras, and bicycling apparel and shoes. It currently and
historically generates income from selling various merchandise
through Amazon.com.
Talk Venture Group filed for Chapter 11 bankruptcy protection
(Bankr. C.D. Cal. Case No. 19-14893) on Dec. 19, 2019. In the
petition signed by Paul Se Won Kim, its president, the Debtor was
estimated to have under $500,000 in assets and under $10 million in
liabilities. The Hon. Theodor Albert oversees the case. The
Debtor is represented by Michael Jay Berger, Esq., at the Law
Offices of Michael Jay Berger.
TGP HOLDINGS III: Moody's Completes Review, Retains B3 CFR
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of TGP Holdings III LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 22, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Traeger's B3 Corporate Family Rating reflects the company's
moderate leverage, modest scale, narrow product focus and risks
associated with being owned by a private equity firm and limited
product and geographic diversification. The discretionary nature of
the company's relatively expensive grills and accessory products is
also a constraint. Traeger's credit profile benefits from its
leading share within the niche wood pellet grill industry and solid
brand strength driven by high product quality and strong
liquidity.
The principal methodology used for this review was Consumer
Durables Industry published in April 2017.
TIBCO SOFTWARE: Moody's Completes Review, Retains B3 CFR
--------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of TIBCO Software Inc. and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
TIBCO Software Inc.'s B3 corporate family rating reflects its very
high leverage, weak organic revenue growth, and highly competitive
infrastructure, analytics and data management software markets. The
company is executing a business model transition from mature,
legacy on-premise infrastructure software toward subscription-based
software solutions for the hybrid and cloud IT environments that
has progressed slower-than-expected. TIBCO's profitability and
operating cash flow have been negatively impacted since the
outbreak of the coronavirus pandemic. The B3 rating incorporates
Moody's expectations for total debt to EBITDA (Moody's adjusted) to
decline toward 7x and free cash flow to increase to about 3% to 4%
of total adjusted debt over the next 12 months driven by a rebound
in software revenue growth in 2021, cost savings from TIBCO's
restructuring actions, and cost synergies from the Information
Builders, Inc. acquisition, which closed in January 2021. TIBCO's
credit profile is supported by its good operating scale, a large
installed base of customers, growing recurring revenues, and good
liquidity.
The principal methodology used for this review was Software
Industry published in August 2018.
TM HEALTHCARE: Committee Taps Berkowitz as Financial Advisor
-------------------------------------------------------------
The official committee of unsecured creditors of TM Healthcare
Holdings, LLC and its affiliates received approval from the U.S.
Bankruptcy Court for the Southern District of Florida to hire
Berkowitz Pollack Brant Advisors and CPAs as its financial advisor.
The firm's services will include:
(a) reviewing the financial and operational information
furnished by the Debtors to the committee;
(b) assisting the committee in its evaluation of the
post-petition cash flow of the Debtors and their subsidiaries;
(c) monitoring the activities of the Debtors regarding their
financial condition and general business operations subsequent
to the filing of the Debtors' Chapter 11 petitions;
(d) assisting the committee in its review of monthly operating
reports submitted by the Debtors or their financial advisor;
(e) managing or assisting with any investigation into the
pre-bankruptcy acts, conduct, transfers of property, liabilities
and financial condition of the Debtors;
(f) providing financial analyses related to the Debtors and
committee's use of unencumbered cash, cash collateral and proposed
debtor-in-possession financing;
(g) analyzing transactions with vendors, insiders, subsidiaries,
related or affiliated entities subsequent and prior to the date of
the petition filing;
(h) assisting the committee or its counsel in any litigation
proceedings, if any, against insiders, affiliated entities and
other potential adversaries;
(i) assisting the committee in its review of the financial or
operational aspects of any proposed sale, evaluating any Chapter 11
plan proposed by the Debtors, and assisting the committee in
handling competing offers;
(j) attending meetings with representatives of the committee and
their counsel, and preparing presentations to the committee that
provide analyses of issues that may arise in the Debtors' Chapter
11 cases.
(k) assisting the committee in executing its duties under
Section 1103 of the Bankruptcy Code; and
(l) other necessary financial advisory services.
Berkowitz Pollack will be paid at these rates:
Directors $495 - $550 per hour
Associate Directors $400 - $425 per hour
Senior Managers $320 - $325 per hour
Managers $250 - $300 per hour
Senior Associates $180 - $225 per hour
Associates $125 - $165 per hour
Paraprofessionals $95 - $125 per hour
Richard Pollack, the director-in-charge of the Forensic and
Advisory Services of Berkowitz Pollack, disclosed in a court filing
that his firm is a "disinterested person" within the meaning of
Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Richard Pollack
Berkowitz Pollack Brant Advisors and CPAs
200 South Biscayne Boulevard
Seventh and Eighth Floors
Miami, FLA 33131
About TM Healthcare Holdings
TM Healthcare Holdings, LLC, a Stuart, Fla.-based company in the
health care business, sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. S.D. Fla. Case No. 20-20024) on Sept. 17,
2020. The petition was signed by CFO Paul Kamps. At the time of
the filing, Debtor had estimated assets of less than $50,000 and
liabilities of between $50 million and $100 million.
Judge Erik P. Kimball oversees the case.
The Debtors tapped Shraiberg Landau & Page P.A. as their legal
counsel, Farlie Turner & Co., LLC as investment banker, and Rinnovo
Management LLC as restructuring advisor. Gregg Stewart of Rinnovo
Management is the Debtors' chief restructuring officer.
Eric M. Huebscher is the patient care ombudsman appointed in the
Debtors' Chapter 11 cases. Baker, Donelson, Bearman, Caldwell &
Berkowitz, P.C. and Huebscher & Company serve as the PCO's legal
counsel and consultant, respectively.
On Oct. 16, 2020, the Office of the U.S. Trustee appointed a
committee of unsecured creditors. Berger Singerman LLP and
Berkowitz Pollack Brant Advisors and CPAs serve as the committee's
legal counsel and financial advisor, respectively.
TURNING POINT: Moody's Rates New $250MM Secured Notes 'Ba3'
-----------------------------------------------------------
Moody's Investors Service affirmed Turning Point Brands, Inc.'s B2
Corporate Family Rating and B2-PD Probability of Default Rating.
Concurrently, Moody's assigned a Ba3 rating to Turning Point's new
$250 million senior secured notes due 2026. Moody's took no action
on the Ba3 ratings on the existing $160 million first lien term
loan due 2023 and the $50 first lien revolving credit facility due
March 2023, as these ratings will be repaid, and Moody's expects to
withdraw the ratings upon close. The Outlook remains Stable and the
Speculative Grade Liquidity rating is maintained at SGL-1.
Turning Point will utilize proceeds from the new $250 million
senior secured notes due 2026 to refinance the remaining $138
million first lien term loan and $50 million first lien revolving
credit facility. The company is also putting in place a new $25
million first lien revolving credit facility due 2025 (unrated).
The remaining proceeds, which will be slightly north of $100
million, will be held in cash and earmarked for future
acquisitions. The existing $172.5 million convertible notes due
2024 (unrated) remain outstanding.
Moody's affirmed the ratings because Turning Point continues to
generate good free cash flow and is executing well on its strategy
to grow revenue and broaden its portfolio of tobacco and related
products. Closing debt to EBITDA, as adjusted by Moody's and pro
forma for the new capital structure and Durfort assets, is high and
expected to increase to 5.9x from 4.5x for the last twelve months
ending September 30, 2020. However, Moody's expects the company's
debt to EBITDA will decline to a low 5x range by executing EBITDA
accretive acquisitions over the next 12-18 months.
Affirmations:
Issuer: Turning Point Brands, Inc.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Assignments:
Issuer: Turning Point Brands, Inc.
Senior Secured Global Notes, Assigned Ba3 (LGD2)
Outlook Actions:
Issuer: Turning Point Brands, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Turning Point's B2 CFR reflects the company's projected return to a
more moderate financial leverage profile over the next 12-18
months, its small size with annual revenues below $500 million, and
the elevated execution risks associated with pursuing an
acquisition-heavy growth strategy and investments into new
generation products. Turning Point competes against significantly
larger, better resourced, and well-known branded tobacco
manufacturers, as well as a variety of smaller companies focused on
niche market segments. Regulatory risks will remain high over the
next year as TPB awaits approval of its vaping and other products
through the pre-market tobacco application process (PMTA). Turning
Point's credit profile benefits from a good market share and
position in niche tobacco categories, projected improvements
internal cash flow generation as PMTA related cash expenses roll
off, and minimal capital spending requirements in its asset-light
model.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered the effect on the company's
performance from the current weak US economic activity and a
gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous, and its continuation will be
closely tied to containment of the virus. As a result, the degree
of uncertainty around Moody's forecasts is unusually high leading
to wide potential variations in demand for tobacco products.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
The US tobacco sector is heavily exposed to social risks related to
consumer lifestyle changes, negative health effects, regulation and
moderating litigation. The tobacco sector is also moderately
exposed to environmental risks such as air pollution and
responsible agriculture. These factors will continue to play an
important role in evaluating the overall creditworthiness of US
tobacco companies, like Turning Point, particularly as the industry
continues to evolve and focus on next-generation reduced
health-risk products.
Turning Point is a widely held publicly-traded company that has
high financial leverage. Moody's expects the company to continue to
focus on business expansion as it seeks to grow its NewGen product
portfolio. The company has prioritized expansion in its business
over debt reduction and Moody's expects the company to continue to
pursue acquisitions, creating event and integration risk.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that the company's
debt/EBITDA will decline to a 5x range over the next 12 months as
it deploys cash to pursue increased investment and acquisitions
into new-generation categories. The stable outlook also reflects
Moody's expectation that the company will generate modest free cash
flow and maintain very good liquidity.
Moody's could upgrade the ratings if the company increases its
scale while reducing financial leverage below 3.0x debt to EBITDA.
The company would also need to successfully integrate acquisitions
as well as maintain growth across its businesses as whole with a
stable to higher EBITDA margin before Moody's would consider an
upgrade.
Moody's could downgrade the ratings if financial leverage is
sustained above 5.0x debt to EBITDA, operating performance
deteriorates, distribution of the company's products is reduced or
halted due to regulatory actions, or if the company's liquidity
weakens.
The principal methodology used in these ratings was Consumer
Packaged Goods Methodology published in February 2020.
Turning Point manufactures and sells smokeless tobacco products,
smoking products, and new-generation products. Smokeless products
include loose leaf chewing tobacco, moist snuff, moist snuff
pouches, and snus. Smoking products consist of cigarette papers,
large cigars, make-your-own cigar wraps, MYO cigar smoking tobacco,
MYO cigarette smoking tobacco and traditional pipe tobacco. The
NewGen products consist of liquid vapor products, tobacco vaporizer
products, a range of non-tobacco products, and other non-nicotine
products. Turning Point's brands include Zig-Zag, Beech-Nut,
Stoker's, Trophy, Havana Blossom, Durango, Our Pride and Red Cap.
Annual revenues are approximately $380 million.
UNIVAR SOLUTIONS: Fitch Upgrades LT IDR to 'BB+', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has upgraded the Long-Term Issuer Default Rating
(IDR) of Univar Solutions, Inc. to 'BB+' from 'BB'. Fitch has also
upgraded the company's senior secured asset-based loan (ABL)
facilities and term loans to 'BBB-'/'RR1' from 'BB+'/'RR1', as well
as upgraded the senior unsecured notes to 'BB+'/'RR4' from
'BB'/'RR4'. The Rating Outlook has been revised to Stable from
Positive.
The upgrade to 'BB+' reflects Fitch's expectation that total debt
to EBITDA will be sustained at or below 3.5x in 2021 and
thereafter, which is consistent with management's stated financial
policy of net debt to EBITDA of 3.0x and 'BB+' rating tolerances.
Univar Solutions has continued to demonstrate strong performance
and resilient FCF through business cycles, with Fitch-projected FCF
of around $125 million in 2020 and trending toward $350 million
through the forecast, and Fitch expects the company to continue to
prioritize its capital allocation in a manner consistent with its
stated financial policies.
In 2020, the company allocated FCF and proceeds from noncore
divestitures toward gross debt reduction, demonstrating its
commitment toward achieving its financial targets. While Fitch
believes Univar Solutions' performance troughed in 2Q20, with
approximately 20% yoy revenue declines, the company was able to
increase its margins during that period, highlighting its continued
progress in improving profitability through further downstream
product offerings, along with ongoing cost and productivity
improvements.
The ratings reflect Univar Solutions' leading market position in
chemicals and ingredients distribution, its flexible and scalable
operating model, resilient and improving profit margins and
considerable FCF generation in all operating environments. The
company maintained ample liquidity throughout 2020, notwithstanding
the impacts of the coronavirus pandemic, while also repaying debt
with proceeds from recent divestitures, and Fitch believes Univar
Solutions will continue to allocate capital toward gross debt
reduction while also seeking bolt-on acquisition opportunities that
align with the company's strategic priorities. The rating also
reflects expectations for continued execution on synergies related
to the integration of Nexeo Solutions, LLC.
KEY RATING DRIVERS
Diversification Mitigates Pandemic Impact: Univar Solutions'
revenues and absolute profits are sensitive to global macroeconomic
factors given the correlation of chemicals demand to changes in
overall economic activity. However, Fitch projects that the
company's revenues declined a modest 12% in 2020, owing to the
company's diverse set of customers and end markets. Weakness in
demand across refining and industrial solutions end markets was
partially offset by strength within consumer solutions-related end
markets.
Fitch believes the company will continue to seek growth within
these higher growth, higher margin end markets, which should
continue to reduce the company's volumetric risk. This strategy has
been highlighted by the Nexeo transaction and subsequent
divestitures of noncore business lines, such as Nexeo's plastic
business and Univar's environmental sciences business.
Resilient and Improving Margins: In recent years, the company has
successfully sought to improve EBITDA margins by pruning or
divesting some of its lower margin or noncore products, investing
in logistic productivity needs and revamping its U.S. salesforce
and building out its Solutions centers in order to understand and
solve customer needs with more complex solutions.
Through the 2019 Nexeo acquisition, the combined product portfolio
provided Univar Solutions with greater strength and the opportunity
for additional product capture from existing customers in its more
resilient, higher margin, higher growth markets, including
adhesives and sealants, food ingredients, personal care and
pharmaceutical ingredients. This effort is highlighted by improved
EBITDA margins in 2019 yoy during a period of customer de-stocking
and general volumetric declines throughout industrials, as well as
Fitch's expectations for a return to improved margins despite a
challenging 2020 as the company benefits from a stronger product
mix and the realization of operational and cost-related synergies
related to Nexeo and its enterprise resource planning (ERP)
integration.
Divestitures Accelerate Deleveraging: Univar Solutions targets a
net debt-to-EBITDA ratio of 3.0x, which it expects to achieve by
YE21. The sale of Nexeo's plastic business for $650 million allowed
for additional deleveraging and further emphasized management's
focus on profitability and growth within its specialty chemicals
portfolio. Univar Solutions also completed the sale of its noncore
environmental sciences business for $195 million in early 2020,
with proceeds used for further debt paydown on its B-3 term loan
due in 2023. Fitch projects that the company will achieve total
debt to EBITDA of around 3.5x by YE21, with management continuing
to allocate capital thereafter in a manner consistent with its
financial policy.
Consistent FCF Generation: Univar Solutions regularly generates
strong, positive FCF driven by modest capital requirements,
consistent and improving profit margins and efficient working
capital management. Fitch projects that the company will generate
around $125 million of FCF in 2020 and trend toward around $350
million annually through the forecast period, providing the company
with substantial financial flexibility to pursue bolt-on
acquisitions, deleverage and seek strategic growth and savings
opportunities.
Fragmented Market Provides Opportunity: The global chemical
distribution market is highly fragmented, with an estimated market
size of roughly $200 billion. The top two distributors account for
about 10% of the market. Benefiting from size, scale and
diversification, Univar Solutions is better able to navigate
logistical challenges and counterparty risk than smaller
competitors. The company maintains the largest chemicals and
ingredients sales force in North America, the broadest product
offering and an increasingly efficient supply chain network,
allowing Univar Solutions to continue to grow by leveraging its
footprint to cover more products, customers and regions.
DERIVATION SUMMARY
Univar Solutions is the second-largest global chemical distributor,
behind Brenntag, and the largest North American chemical
distributor in what is a fragmented industry. Fitch compares Univar
Solutions with chemical distributor Brenntag, IT distributors
Ingram Micro, Inc. (BBB-/Ratings Watch Negative) and Arrow
Electronics, Inc. (BBB-/Stable) and metals distributor Reliance
Steel and Aluminum Co. (BBB/Stable).
Each of these distributors benefits from significant size, scale
and diversification compared with peers within their markets. Fitch
believes the fragmented nature of, and potential for, continued
outsourcing within chemicals distribution provides Univar Solutions
a unique opportunity to increase market share and capture potential
market expansion.
Fitch views cashflow risk within the distribution industry as
relatively low compared with chemicals producers given the limited
commodity price risk, diversification of customers and end markets,
low annual capex requirements of 1%-2% annually and working capital
benefits amid the current down cycle. While technology and metals
distribution market risks differ, the overall operating
performances and cashflow resiliency are similar, with FCF margins
for these distribution peers averaging in the low- to mid-single
digits over the past five years.
Fitch expects Univar Solutions' gross leverage to improve to 3.5x
or below by YE21 and thereafter, assuming sequential growth in the
forecast period, continued favorable integration of the Nexeo
chemicals business and a continued focus on deleveraging. Fitch
views this leverage profile as consistent with 'BB+' rating
tolerances.
KEY ASSUMPTIONS
-- A revenue decline of around 12% in 2020 before improving
sequentially in 2021-2022 to 2019 levels and in approximation
with GDP thereafter.
-- EBITDA margins increase yoy following Nexeo's integration as
higher margin products are increasingly sold and cost cutting
efforts and synergies are realized.
-- Capex at roughly 1.5% of revenue annually.
-- FCF allocated toward gross debt reduction and acquisitions so
as to remain within management targets.
-- No dividends or share repurchases over the next few years.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Continued EBITDA margin improvement, suggesting successful
organic and inorganic investments that further enhance the
operational profile and reduce cashflow risk through increased
differentiated offerings.
-- Gross debt reduction leading to total debt to EBITDA below
3.0x or FFO-adjusted leverage at less than 3.0x.
-- Maintenance of strong liquidity and continued FCF generation.
-- A demonstrated track record of adherence to capital allocation
priorities and financial policy targets.
-- Further upgrades will be closely linked to a clear long-term
strategic plan and financials that are consistent with
investment-grade credit profiles.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An inability to effectively integrate acquisitions or realize
expected operational and cost synergies.
-- Capital allocation prioritization toward additional
acquisitions or shareholder returns over gross debt reduction
that suggests a deviation in financial policy.
-- Total debt to EBITDA sustained above 3.5x or FFO-adjusted
leverage greater than 4.5x.
-- A sustained reduction in EBITDA margins below historical
levels of 6%-7% leading to weaker FCF generation and financial
flexibility.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: As of Sept. 30, 2020, Univar Solutions had
$273.7 million of cash and cash equivalents on its balance sheet
and approximately $457 million of availability under the combined
ABL facilities, after $164.1 million in outstanding LOCs and
approximately $465 million in borrowings. Fitch expects Univar
Solutions to maintain sufficient liquidity given the forecast FCF
profile.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
UNIVERSITY DEVELOPMENTS: March 12 Foreclosure Sale Set
------------------------------------------------------
CBRE National Loan Sale Advisors announces an opportunity to
acquire ("Acquisition") the equity interests ("Collateral") in
University Developments LLC ("Owner"), which owns the property
located at and commonly known as Atelier at University Park, 2450
South University Boulevard, Denver, Colorado ("Property"). The
Acquisition will be effectuated pursuant to a foreclosure sale
under the Uniform Commercial Code, with respect to a pledge and
security agreement in favor of CMTG GS Finance LLC ("Lender"),
which is secured by such equity interests.
The auction will be held on March 12, 2021, at 11:00 a.m. (EST) at
the Law offices of Schulte Roth & Zabel LLP via web-based video
conferencing or telephonic conferencing program selected by the
lender. The Collateral will be sold as a whole and will be sold to
a single purchaser in accordance with auction procedures conducted
by Matthew D. Mannion of Mannion Auctions, LLC, NYC DCA License No.
1434494.
Lender reserves and preserves its right to credit bid at the
Auction all or part of the outstanding indebtedness under the
documents that govern the Loan and assign such successful bid to
its designee. Potential bidders are encouraged to perform such due
diligence as they deem necessary. All prospective bidders, and
others receiving or examining non-public information will be
required to enter into a nondisclosure agreement and keep the
information strictly confidential.
In addition to certain late payment charges and other costs and
expenses, there are also outstanding interest payments in the
aggregate amount of $1,399,902 -- inclusive of interest at the
regular rate and additional interest payable as a result of the
existence of an Event of Default -- as of Jan. 12, 2021.
For questions and inquiries, please contact:
CBRE National Loan Sale Advisors
c/o Chris McClain
Tel: (214) 647 8320
Chris.McClain2@cbre.com
VERSCEND INTERMEDIATE: Fitch Assigns First-Time 'B' LT IDR
----------------------------------------------------------
Fitch has assigned a first-time Long-Term Issuer Default Rating
(IDR) of 'B' to Verscend Intermediate Holding Corp. (Cotiviti) and
Verscend Holding Corp. Fitch has also assigned a 'BB-'/'RR2' issue
rating to Verscend Holding Corp.'s senior first-lien secured term
loan B and a 'CCC+'/'RR6' issue rating to Verscend Holding Corp.'s
senior unsecured notes. The Rating Outlook is Stable.
Cotiviti is a leading provider of payment accuracy analytics to
healthcare organizations and retailers. The company was formed
through the acquisition assets of Verisk Analytics (BBB+/Stable)
and later Cotiviti Holdings, Inc., led by Veritas Capital. On Dec.
21, 2020, Gainwell Technologies (B/Stable), a portfolio company of
Veritas acquired from DXC Technology Company (BBB/Stable), entered
into a definitive agreement to acquire HMS Holdings Corp. for
$37/share in cash, for an enterprise value of $3.4 billion.
Cotiviti intends to acquire from Gainwell, HMS capabilities focused
on the commercial, Medicare and federal markets to complement its
existing data-driven healthcare business. The acquisition is
expected to be financed with a $550 million incremental 1L TLB,
$275 million new 2L TLB, $150 million in incremental preferred
payment-in-kind (PIK) equity and approximately $128 million in cash
for a purchase price of $1.1 billion including fees and expense.
The transaction is expected to close in 1H21.
KEY RATING DRIVERS
HMS Strategic Rationale: Cotiviti's approximately $1.1 billion
acquisition of HMS capabilities, such as commercial coordination of
benefits (COB), Federal/Medicare and health plan payment integrity
(PI), and population health management (PHM), compliments its
existing data-driven healthcare solutions business.
The combined capabilities will span Cotiviti's historical focus on
pre-pay PI with the inclusion of HMS's focus on post-pay PI.
Cotiviti will gain a foothold in the PHM market with the potential
to combine its analytics and downstream offerings. HMS's midsize
customer base will create a meaningful cross-sell opportunity for
Cotiviti, which is comprised of larger payors.
Secular Tailwinds: The PI market, which was estimated at $6.5
billion in 2019, is expected to grow 7% annually through 2024. The
COB market estimated at $1.6 billion is expected to grow 5% CAGR
over the same period and the PHM market, estimated at $1.4 billion
is expected to grow 13%. Growing unsustainable healthcare spending,
increasing enrollment, and expansion of value-based care delivery
models are driving these markets.
The Centers for Medicare and Medicaid Services (CMS) projects U.S.
healthcare spending overall to grow at 5.4% annually from
2019-2028. Medicare, which comprises about 40% of HMS's PI
business, is expected to grow 7.6% as a result of having the
highest projected enrollment growth.
Market Position and Customer Concentration: Cotiviti serves 180
payor customers with an average eight-year customer tenure (11
years for its top 25 customers). The company has 141 million
longitudinal patient records and processes in excess of 900 billion
claims annually. In 2019 Cotiviti had two customers representing
10% or more of revenue and a concentration of 10% or more of
customers was 22%.
Fitch estimates Cotiviti had approximately a 18% share of the PI
market in 2019, excluding Medicaid and the approximately 5% of
Cotiviti's retail sector PI revenue. HMS has 350 health plan
customers, including 22 of the top 25. Fitch estimates HMS had a 2%
share of the PI market. HMS's 10 largest customers represented 43%
of revenue in 2019, although it had no companies that represented
10% or more of revenue.
Synergy Opportunity: Management estimates it can realize $50
million in synergy opportunities, approximately one-third headcount
related. Fitch conservatively assumes about half of the $33 million
in non-headcount synergies are realized, providing upside to the
extent platform integration and footprint and vendor consolidation
leads to greater than expected recurring cost savings.
Fitch believes Cotiviti's track record of successful integrations
in conjunction with the financial sponsor's cost discipline broadly
and in the prior combination of Cotiviti and Verscend (f/k/a Verisk
Health), which saw 25% overperformance of annualized cost savings
to plan, will reduce execution risk associated with the HMS
transaction.
Aggressive Financial Structure: Opening leverage of 8.7x, assigning
50% equity credit to the PIK preferred, and 8.0x excluding the PIK,
is high for the 'B' rating category. However, assuming 7% to 8%
CAGR 2021-2-24 revenue growth, and 150bps of margin expansion over
the same period, reflecting $25 million in net annual synergies,
Fitch estimates leverage may decline to 5.0x to 5.5x, or 4.5x to
5.0x excluding the PIK.
Fitch generally views data analytics businesses characterized by
high margins, which are circa 50% for the combined Cotiviti and HMS
businesses, and strong cash flow generating power as able to
sustain high leverage. Fitch does not anticipate Cotiviti will make
voluntary debt repayment, although the company will generate
significant FCF of which it could direct a portion towards
pre-payments, a priority versus M&A beyond the HMS integration
period, as well as capital distributions. Further, there is a
likelihood Cotiviti later cash pays the PIK and/or refinances it
with straight debt.
DERIVATION SUMMARY
Cotiviti in conjunction with the planned acquisition of HMS assets
from Gainwell sits at the intersection of data analytics and
healthcare technology/BPO. Given the margin profile, highly
recurring revenue and tight integration in customer workflows being
closely aligned with data analytics peers, Fitch categorizes
Cotiviti in this sector, while evaluating its comparability to
providers in the healthcare IT space as well.
Fitch notes other data analytics peers tend to focus on multiple
end-market sectors, while acknowledging one of the main predecessor
businesses of Cotiviti was divested from Versisk, a major data
provider to insurance, financial services and natural resources
sectors. Cotiviti maintains a small proportion of retail end market
exposure at approximately 5%.
Cotiviti's pro forma margin profile compares with strong
investment-graded data analytics peers and the overall rated
universe, which see margins in the 30% to 50% range, centered on
approximately 40%. Cotiviti also enjoys very strong revenue
visibility, consistent with an 'a' factor rating within the
Business Services DAP Navigator, reflecting greater than 80% of
revenue being under contract, renewal rates of greater than 90%,
and 90% of revenue considered recurring.
Fitch considers the Sector Environment relative to data analytics
peers, however, to be a limiting factor. While the existence of
many healthcare analytics and IT firms are due to the complex U.S.
regulatory environment, this presents a risk to the extent payor
models are forced to change dramatically due to unsustainable
healthcare spending.
Finally, Cotiviti's Financial Structure compares unfavorably with
data analytics peers, given very high leverage at greater than 8x.
However, the company has significant capacity to delever through
EBITDA expansion on the assumption of robust growth, in line to
slightly above market averages, in reflection of its combined
market position, and realization of reasonable synergies. Fitch
sees risk of continued M&A or capital distributions as potentially
leading to sustained high leverage and weak credit protection
metrics.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- High-teens revenue growth in 2021 reflecting coronavirus
recovery, normalizing to high-single-digits over the ratings
horizon reflecting high Cotiviti customer retention and growth
in HMS business.
-- Pro forma adjusted EBITDA margin growth to approximately 53%
to 54% reflecting operating leverage and realization of
synergies with headcount fully realized and non-headcount half
realized.
-- Capex of 7% of revenue.
-- Preferred equity PIK interest capitalized over rating horizon.
-- FCF generated used for dividends or M&A; no incremental debt
financed transactions assumed.
KEY RECOVERY RATING ASSUMPTIONS
-- The recovery analysis assumes that Cotiviti would be
reorganized as a going-concern in bankruptcy rather than
liquidated.
-- Fitch has assumed a 10% administrative claim.
Going-Concern (GC) Approach
-- The GC EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
enterprise valuation. Fitch contemplates a scenario in which
coronavirus-related effects are extended through 2021
resulting in continued deferral of procedures and reduced
payment integrity revenue. Additionally, Cotiviti experiences
the permanent loss of 10% of customers due to competitive
pressures and does not experience typical rapid growth.
-- Under this scenario, Fitch believes EBITDA margins would
decline such that the resulting GC EBITDA is approximately 14%
below proforma LTM Sept. 30, 2020 EBITDA and 22% below
proforma 2019 EBITDA.
-- An enterprise multiple of 7x EBITDA is applied to the GC
EBITDA to calculate a post-reorganization enterprise value.
The choice of this multiple considered the following factors:
-- The historical bankruptcy case study exit multiples for peer
companies ranged from 2.5x-8.1x, with an average of 6.2x,
details as follows:
-- M&A precedent transactions for healthcare IT peers ranged from
10x-16x, with recent activity at the upper end of that range.
Additionally, HMS was acquired at a 20.5x multiple, excluding
synergies.
-- Similar public companies trade at EBITDA multiples in the 15x
18x range.
-- Fitch uses a multiple of 7x, in line with healthcare IT but
below the upper end of the range for data analytics providers,
which is the most comparable.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Total debt with equity credit/operating EBITDA sustained at
5.5x or below.
-- Cash flow from operations (CFO) less capex over total debt
with equity credit sustained above 6.5%.
-- FFO coverage sustained above 3x.
-- Reduction in customer concentration of the largest customers
to below 10%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total debt with equity credit/operating EBITDA sustained at
7.5x or above.
-- CFO less capex over total debt with equity credit sustained
below 5%.
-- FFO coverage sustained below 2x.
-- Material adverse shift in U.S. healthcare payor model or
regulation.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Cotiviti is expected to have approximately $115
million of cash at the close of the HMS transaction. Further the
company is expected to maintain access to its $300 million undrawn
revolving credit facility. Fitch expects Cotiviti to generate
low-to-mid-teens FCF, as a percentage of revenue, although this
assumes no cash payments allocated to the PIK preferred or other
capital distributions.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
Environmental, Social and Corporate Governance (ESG) Credit
Relevance is a Score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WARDMAN HOTEL: Chapter 11 Case Belongs in Delaware, Says Owner
--------------------------------------------------------------
Law360 reports that the owners of a Washington D.C. hotel told a
Delaware bankruptcy judge late Tuesday, February 2, 2021, that its
Chapter 11 case should stay in Delaware, saying an effort by
adversary Marriott Hotel Services to transfer the case wasn't
supported by the facts.
In its objection to Marriott's motion, Wardman Hotel Owners LLC
said the effort is a blatant attempt to stymie the debtor's
bankruptcy goals and is a litigation tactic aimed at providing a
benefit only to Marriott. "Now, Marriott seeks leave from this
court to transfer the debtor's case to the D. C. bankruptcy court
for no apparent reasons."
Marriott Hotel Services Inc. on Jan. 25, 2021, filed a motion to
transfer the case from Delaware to Washington D.C., where the hotel
is located. The Debtor, along with insurers Pacific Life Insurance
Company's and PL Wardman Member, LLC, has opposed the move.
About Wardman Hotel
Wardman Hotel Owner, L.L.C., owns Marriott Wardman Park Hotel, a
convention hotel located at 2600 Woodley Road NW, in the Woodley
Park neighborhood of Washington, D.C.
Wardman Hotel Owner, L.L.C., filed a Chapter 11 bankruptcy petition
(Bankr. D. Del. Case No. 21-10023) on Jan. 11, 2021. In the
petition signed by James D. Decker, manager, the Debtor estimated
$100 million to $500 million in assets and liabilities. The Hon.
John T. Dorsey is the case judge. PACHULSKI STANG ZIEHL & JONES
LLP, led by Laura Davis Jones, is the Debtor's counsel.
WATERSHED HOLDINGS: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------------
Debtor: Watershed Holdings, LLC
5012 112th Ave NE
Kirkland, WA 98033-7717
Business Description: Watershed Holdings, LLC is the owner of fee
simple title to three real properties in
Seattle, Washington having a total
comparable sale value of $6 million.
Chapter 11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Western District of Washington
Case No.: 21-10235
Judge: Hon. Timothy W. Dore
Debtor's Counsel: Larry B. Feinstein, Esq.
LARRY B FEINSTEIN, PS
929 108th Ave. NE
Ste 1200
Bellevue, WA 98004
Tel: 425-643-9595
E-mail: 1947feinstein@gmail.com
Total Assets: $6,000,331
Total Liabilities: $7,076,083
The petition was signed by Marc Wilson, executive vice president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's 20 largest unsecured creditors is available
for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/T2GENPQ/Watershed_Holdings_LLC__wawbke-21-10235__0001.0.pdf?mcid=tGE4TAMA
WEINSTEIN CO: 3 Actresses to Appeal $17-Mil. Plan Approval
----------------------------------------------------------
Alex Wolf of Bloomberg Law reports that three actresses and a
female former employee of the Weinstein Co. Holdings LLC are
planning to appeal a bankruptcy court's approval of the defunct
studio's plan to wind down and establish a $17 million fund for
Harvey Weinstein's victims, the women's attorney said.
The Chapter 11 plan, approved Jan. 25, 2021 by Judge Mary F.
Walrath of the U.S. Bankruptcy Court for the District of Delaware,
improperly lets the company's directors and officers off the hook
for ignoring and allowing Weinstein’s predatory behavior,
attorney Douglas H. Wigdor told Bloomberg Law Wednesday, February
3, 2021.
About The Weinstein Company
The Weinstein Company (TWC) -- http://www.WeinsteinCo.com/-- is a
multimedia production and distribution company launched in 2005 in
New York by Bob and Harvey Weinstein, the brothers who founded
Miramax Films in 1979. TWC also encompasses Dimension Films, the
genre label founded in 1993 by Bob Weinstein. During Harvey and
Bob's tenure at Miramax and TWC, they have received 341 Oscar
nominations and won 81 Academy Awards.
TWC dismissed Harvey Weinstein in October 2017, after dozens of
women came forward to accuse him of sexual harassment, assault or
rape.
The Weinstein Company Holdings LLC and 54 affiliates sought Chapter
11 protection (Bankr. D. Del. Lead Case No. 18-10601) on March 19,
2018, after reaching a deal to sell all assets to Lantern Asset
Management for $310 million.
The Weinstein Company Holdings estimated $500 million to $1 billion
in assets and $500 million to $1 billion in liabilities.
The Hon. Mary F. Walrath is the case judge.
Cravath, Swaine & Moore LLP is the Debtors' bankruptcy counsel,
with the engagement led by Paul H. Zumbro, George E. Zobitz, and
Karin A. DeMasi, in New York.
Richards, Layton & Finger, P.A., is the local counsel, with the
engagement headed by Mark D. Collins, Paul N. Heath, Zachary I.
Shapiro, Brett M. Haywood, and David T. Queroli, in Wilmington,
Delaware.
The Debtors also tapped FTI Consulting, Inc., as restructuring
advisor; Moelis & Company LLC as investment banker; and Epiq
Bankruptcy Solutions, LLC as claims and noticing agent.
The official committee of unsecured creditors retained Pachulski
Stang Ziehl & Jones, LLP as its legal counsel, and Berkeley
Research Group, LLC, as its financial advisor.
WELD NORTH: Moody's Completes Review, Retains B2 CFR
----------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Weld North Education LLC and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Weld North's B2 CFR broadly reflects its high leverage, modest
scale, competitive industry, and aggressive financial policies due
to private equity ownership. However, the rating is supported by
the company's established position in the K-12 digital learning
curriculum market, track record of solid operating performance and
successfully integrating acquisitions, favorable growth prospects
driven by the industry transition to digital learning and new
customer wins, and very good liquidity.
The principal methodology used for this review was Business and
Consumer Service Industry published in October 2016.
XPERI HOLDING: Moody's Completes Review, Retains Ba3 CFR
--------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Xperi Holding Corporation and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on January 27, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), recent
developments, and a comparison of the financial and operating
profile to similarly rated peers. The review did not involve a
rating committee. Since January 1, 2019, Moody's practice has been
to issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
Key rating considerations
Xperi Holding Corporation's Ba3 corporate family rating reflects
its solid revenue scale, which is diversified from a broad
portfolio of products and intellectual property. The company's
consistent free cash flow generation from its high margin
intellectual property licensing business and modest capital
expenditure requirements provide support for the rating as well.
The credit profile is constrained by integration and operational
risks of the TiVo and Xperi merger. Additionally, about a third of
the company's license billings are related to consumer products
with short lifecycles of one to three years, which can contribute
to revenue volatility and end market exposure in the near term.
Although revenues were negatively impacted in 2020 due to weakness
in the automotive end market, the Comcast litigation settlement and
license renewal in November 2020 and Moody's expectation of an
economic recovery in 2021 should drive growth in revenues, EBITDA,
and free cash flow over the next year, improving adjusted free cash
flow to debt toward the mid-teens percent level.
The principal methodology used for this review was Software
Industry published in August 2018.
YC ATLANTA HOTEL: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: YC Atlanta Hotel LLC
1418 Virginia Ave.
College Park, GA 30337
Business Description: YC Atlanta Hotel LLC owns and operates
a hotel.
Chapter 11 Petition Date: February 3, 2021
Court: United States Bankruptcy Court
Northern District of Georgia
Case No.: 21-50964
Debtor's Counsel: David L. Bury, Jr., Esq.
STONE & BAXER, LLP
577 Mulberry Street, Suite 800
Macon, GA 31201
Tel: 478-750-9898
Fax: 478-750-9899
E-mail: dbury@stoneandbaxter.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $10 million to $50 million
The petition was signed by Baldev Johal, managing member and
authorized party.
A copy of the petition containing, among other items, a list of the
Debtor's 20 largest unsecured creditors is available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/VQ4GDGI/YC_Atlanta_Hotel_LLC__ganbke-21-50964__0001.0.pdf?mcid=tGE4TAMA
YELLOWSTONE TRANSPORTATION: Case Summary & 17 Unsecured Creditors
-----------------------------------------------------------------
Debtor: Yellowstone Transportation Group, Inc.
301 McCullough Dr., Ste 400
Charlotte, NC 28262
Chapter 11 Petition Date: January 28, 2021
Court: United States Bankruptcy Court
Western District of North Carolina
Case No.: 21-30050
Debtor's Counsel: John C. Woodman, Esq.
ESSEX RICHARDS, P.A.
1701 South Blvd.
Charlotte, NC 28203
Tel: 704-377-4300
Fax: 704-372-1357
E-mail: jwoodman@essexrichards.com
Estimated Assets: $100,000 to $500,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Andre Isaac, the authorized
representative.
A copy of the petition containing, among other items, a list of the
Debtor's 17 unsecured creditors is available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/LRBM7MQ/Yellowstone_Transportation_Group__ncwbke-21-30050__0001.0.pdf?mcid=tGE4TAMA
[^] BOOK REVIEW: Hospitals, Health and People
---------------------------------------------
Author: Albert W. Snoke, M.D.
Publisher: Beard Books
Softcover: 232 pages
List Price: $34.95
Order your personal copy today at
http://www.beardbooks.com/beardbooks/hospitals_health_and_people.html
Hospitals, Health and People is an interesting and very readable
account of the career of a hospital administrator and physician
from the 1930's through the 1980's, the formative years of today's
health care system. Although much has changed in hospital
administration and health care since the book was first published
in 1987, Dr. Snoke's discussion of the evolution of the modern
hospital provides a unique and very valuable perspective for
readers who wish to better understand the forces at work in our
current health care system.
The first half of Hospitals, Health and People is devoted to the
functional parts of the hospital system, as observed by Dr. Snoke
between the late 1930's through 1969, when he served first as
assistant director of the Strong Memorial Hospital in Rochester,
New York, and then as the director of the Grace-New Haven Hospital
in Connecticut. In these first chapters, Dr. Snoke examines the
evolution and institutionalization of a number of aspects of the
hospital system, including the financial and community
responsibilities of the hospital administrator, education and
training in hospital administration, the role of the governing
board of a hospital, the dynamics between the hospital
administrator and the medical staff, and the unique role of the
teaching hospital.
The importance of Hospitals, Health and People for today's readers
is due in large part to the author's pivotal role in creating the
modern-day hospital. Dr. Snoke and others in similar positions
played a large part in advocating or forcing change in our hospital
system, particularly in recognizing the importance of the nursing
profession and the contributions of non-physician professionals,
such as psychologists, hearing and speech specialists, and social
workers, to the overall care of the patient. Throughout the first
chapters, there are also many observations on the factors that are
contributing to today's cost of care. Malpractice is just one
example. According to Dr. Snoke, "malpractice premiums were
negligible in the 1950's and 1960's. In 1970, Yale-New Haven's
annual malpractice premiums had mounted to about $150,000." By the
time of the first publication of the book, the hospital's premiums
were costing about $10 million a year.
In the second half of Hospitals, Health and People, Dr. Snoke
addresses the national health care system as we've come to know it,
including insurance and cost containment; the role of the
government in health care; health care for the elderly; home health
care; and the changing role of ethics in health care. It is
particularly interesting to note the role that Senator Wilbur Mills
from Arkansas played in the allocation of costs of hospital-based
specialty components under Part B rather than Part A of the
Medicare bill. Dr. Snoke comments: "This was considered a great
victory by the hospital-based specialists. I was disappointed
because I knew it would cause confusion in working relationships
between hospitals and specialists and among patients covered by
Medicare. I was also concerned about potential cost increases. My
fears were realized. Not only have health costs increased in
certain areas more than anticipated, but confusion is rampant among
the elderly patients and their families, as well as in hospital
business offices and among physicians' secretaries." This aspect of
Medicare caused such confusion that Congress amended Medicare in
1967 to provide that the professional components of radiological
and pathological in-hospital services be reimbursed as if they were
hospital services under Part A rather than part of the co-payment
provisions of Part B.
At the start of his book, Dr. Snoke refers to a small statue,
Discharged Cured, which was given to him in the late 1940's by a
fellow physician, Dr. Jack Masur. Dr. Snoke explains the
significance the statue held for him throughout his professional
career by quoting from an article by Dr. Masur: "The whole question
of the responsibility of the physician, of the hospital, of the
health agency, brings vividly to mind a small statue which I saw a
great many years ago.it is a pathetic little figure of a man, coat
collar turned up and shoulders hunched against the chill winds,
clutching his belongings in a paper bag-shaking, tremulous,
discouraged. He's clearly unfit for work-no employer would dare to
take a chance on hiring him. You know that he will need much more
help before he can face the world with shoulders back and
confidence in himself. The statuette epitomizes the task of medical
rehabilitation: to bridge the gap between the sick and a job."
It is clear that Dr. Snoke devoted his life to exactly that
purpose. Although there is much to criticize in our current
healthcare system, the wellness concept that we expect and accept
today as part of our medical care was almost nonexistent when Dr.
Snoke began his career in the 1930's. Throughout his 50 years in
hospital administration, Dr. Snoke frequently had to focus on the
big picture and the bottom line. He never forgot the importance of
Discharged Cured, however, and his book provides us with a great
appreciation of how compassionate administrators such as Dr. Snoke
have contributed to the state of patient care today. Albert Waldo
Snoke was director of the Grace-New Haven Hospital in New Haven,
Connecticut from 1946 until 1969. In New Haven, Dr. Snoke also
taught hospital administration at Yale University and oversaw the
development of the Yale-New Haven Hospital, serving as its
executive director from 1965-1968. From 1969-1973, Dr. Snoke worked
in Illinois as coordinator of health services in the Office of the
Governor and later as acting executive director of the Illinois
Comprehensive State Health Planning Agency. Dr. Snoke died in April
1988.
*********
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public debt and equity securities about which we report.
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then-ending.
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*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
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Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors.
Copyright 2021. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***